‘Our expectation is that three years after launch, AI PCs will represent between 40 percent and 50 percent of total PC shipments,’ HP CEO Enrique Lores says ahead of its second-quarter earnings release, which reports that falling printer demand offset commercial PC growth.

HP Inc. CEO Enrique Lores said the company expects AI PCs to account for 10 percent of the client computers it ships in the second half of its fiscal year.

These AI PCs include first-generation offerings powered by Intel and AMD chips that debuted in April as well as next-generation Copilot+ offerings powered by Qualcomm’s Snapdragon X processors that will launch in June, Lores said in a briefing with journalists ahead of HP’s second-quarter earnings release on Wednesday.

[Related: Why Intel Thinks 2024 Is A Big Commercial PC Refresh Year]

The shipment forecast, which covers a six-month period between the beginning of May and the beginning of November, falls in line with previous statements by the chief executive that adoption of PCs with advanced AI capabilities will take “some time.”

In the briefing, Lores said he expects consumers to drive a greater share of AI PC sales than commercial customers in the beginning because the latter group needs more time to evaluate new systems before buying them in large quantities.

However, Lores expects AI PC demand to significantly increase over the next few years, in part because of growing interest from commercial customers.

“Our expectation—as we have said before and we have not changed that—is that three years after launch, AI PCs will represent between 40 percent and 50 percent of total PC shipments, so it [will be] a fairly significant part of the PC shipments,” he said.

Research firms IDC and Gartner have both forecasted that HP and other OEMs will ship around 50 million AI PCs globally this year, which would account for 22 percent of total PC shipments estimated in 2024, according to the latter firm.

Both firms expect AI PC shipments to then double in 2025, bringing the category’s share of total shipments to 43 percent in 2025. IDC is forecasting that AI PCs will represent nearly 60 percent of global shipments by 2027.

While Lores expects AI PCs to eventually play a big role in driving PC refreshes among commercial customers, he said main factor influencing purchases now is Windows 11, which customers are moving to because of new hardware requirements and Microsoft’s plan to end support for Windows 10 in October 2025.

“As customers evaluate [AI PCs], they will see the value that they bring, they will accelerate the refresh cycle,” he said. “From a productivity perspective, they bring a lot of value.”

As an example, HP worked with global consulting firm Deloitte to develop an AI model that can save “100,000 hours of productivity,” according to Lores. He also touted new tools from Microsoft that will let people work “much more productively and efficiently than before.”

Commercial PC Growth Offset By Falling Print Demand

In HP’s second-quarter earnings release on Wednesday, the company reported a revenue of $12.8 billion, nearly 1 percent lower than the same period last year.

While HP’s Personal Systems revenue grew 3 percent year-over-year to $8.4 billion due to an increase in sales for commercial PCs, printing revenue declined 8 percent year-over-year to $4.5 billion due to falling consumer and commercial demand.

“The key thing is that we’re starting to see signs of recovery,” Lores said, noting that the second quarter marked a return to growth for the personal systems business.

Within the Personal Systems business, revenue was up 6 percent and unit shipments were up 12 percent in the commercial segment. This more than offset a 3 percent revenue decline and a 1 percent decrease in unit shipments in the consumer segment.

Lores said HP also made “good progress” in key growth areas such as services and subscriptions. These services include offerings like the Workforce Experience Platform, or WEX for short, from within HP’s Workforce Solutions business, which grew revenue and scored “significant deals across multiple industries,” he added.

“We are seeing good traction because this brings productivity and cost reduction to our customers and they appreciate the value proposition that that we bring,” he said.

As for HP’s printing business, revenue and unit shipments were down by 12 percent and 17 percent, respectively, year-over-year for the commercial segment. Meanwhile, consumer printing revenue declined by 16 percent while unit shipments decreased by 17 percent.

Lores said the main factor hurting demand has been a “lack of investment from a customer’s perspective,” including on the commercial side.

However, he added, HP expects the printing business to stabilize in the second half of the company’s fiscal year, which ends in early November.

“From a consumption perspective, from a usage perspective, when we look at consumption of printer[s], it’s fairly stable, which indicates that printers are being used, and it’s actually a positive indicator for the business,” he said.

HP beat Wall Street’s expectations on revenue by nearly $200 million and on earnings per share by 1 cent. Its stock price was up more than 1 percent in after-hours trading.