HP stock jumps on solid earnings and optimism for AI-powered computers

HP Inc. Shares (HPQ) rallied on Thursday, a day after the company reported solid earnings and signaled it could continue to benefit from the artificial intelligence (AI) boom.

HP reported fiscal second quarter 2024 total revenue of $12.8 billion, according to estimates compiled by Visible Alpha, down slightly from last year’s $12.91 billion but better than analyst expectations $12.59 billion. Net revenue for Personal Systems, which includes desktops and servers, rose 3% year-over-year to $8.4 billion, but its printing division fell 8% to $4.4 billion.

Net income of $607 million, or 61 cents per share, missed estimates of $678.9 million, or 69 cents per share, due to just over $200 million in one-time charges. After eliminating charges, HP’s adjusted earnings of $812 million, or 82 cents per share, beat estimates of $803.5 million, or 81 cents per share.

“We had a solid quarter and first half of the year and presented an innovative portfolio of solutions designed for the era of artificial intelligence and hybrid technology,” said HP CEO Enrique Lores. “As the market recovers and new AI-enabled PCs are introduced, we are well positioned to deliver profitable growth across our business.”

HP may benefit from the era of artificial intelligence

HP stock has already been buoyed by AI optimism, as Lores has stated in previous quarters that while it will take the company some time to widely adopt new products such as AI PCs, the new technology could be a significant growth driver in 2025 and Later.

“The initial response has been overwhelmingly positive, as our next-generation devices have been recognized as some of the most advanced premium devices announced and feature state-of-the-art hardware,” Lores said in Wednesday’s earnings release.

He also said the company expects demand to be higher than the average new PC launch cycle when it begins rolling out AI-enabled computers in the second half of the year. The company’s AI product portfolio, from commercial products to personal use and video games, allows it to “seize the opportunity and lead the industry,” Lores said.

AI-powered desktops are expected to account for about 10% of HP’s PC sales in the second half of the year, but Lores says HP expects that number to grow to 40-60% of PC sales over the next three years. with prices of new computers being on average 5% to 10% higher than current models.

HP shares jumped 17% by 12:07 a.m. ET on Thursday to $38.43, a two-year high.