The PC market remains a few fuses short.
Shares of PC-making giant HP Inc. (HPQ) plunged over 8% in early trading on Wednesday as persistent tepid demand for computers led to a full-year profit warning.
HP now sees full-year adjusted earnings of $3.23 to $3.25 a share, down from $3.30 to $3.50 previously. Free cash flow is targeted at $3 billion compared to a prior outlook of $3.25 billion.
"This outlook is largely driven by the continued aggressive pricing environment in PCs, sluggish demand in China, and enterprise demands," HP CEO Enrique Lores told analysts on the earnings call. "Notwithstanding the actions we are taking to mitigate these headwinds, we believe it's prudent to lower our outlook based on near-term market reality."
The market reality led to a challenging quarter for HP.
Fiscal third quarter sales fell 9.9% from a year ago to $13.2 billion. Consumer PC sales dropped 12%, while sales to businesses fell 11%. And adjusted earnings per share declined 17% from a year earlier.
HP isn't alone in shedding light on the continued challenges of getting consumers to upgrade their pandemic PC purchases.
Best Buy (BBY) said on Tuesday that its comparable store sales in the computing and mobile phone category declined by 6.4%. A year earlier, sales in the category tanked 16.6%.
Best Buy CEO Corie Barry told analysts there are signs of "stabilization" in the PC category, with incremental quarterly improvement in laptop sales. But Barry acknowledged the recovery for the category won't be "linear."
Additionally, Apple's (AAPL) earnings several weeks ago revealed a 7.3% decline in sales of Macs.
Worldwide PC shipments tallied 59.7 million units in the second quarter, a 16.6% decline year over year according to Gartner. Lenovo, HP, Dell, Apple, Acer, and Asus all saw shipment declines in the quarter, Gartner's data shows.
"The PC market is [in] the bottoming process, but it has been an unmitigated disaster for the likes of HP and others," Wedbush tech analyst Dan Ives told Yahoo Finance. "Still some dark times ahead."
International Data Corporation (IDC) estimated this week that PC growth won't return until 2024.
The tech researcher projected that PC shipments will increase by 3.7% next year to 261.4 million. Shipments are slated to be higher than 2018 levels but below 2019 levels.
"Consumer demand remains tepid at best as the segment continues to face economic headwinds," IDC research manager Jitesh Ubrani said. "Consumer demand for PCs also faces challenges from other devices including smartphones, consoles, tablets, and more, marking 2023 as the year with the greatest annual decline in consumer PC shipments since the category's inception."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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