(Bloomberg) -- HP Inc. fell the most in more than three years after cutting its profit outlook and acknowledging that a rebound in personal-computer demand isn’t coming as quickly as hoped.
The Palo Alto, California-based computer supplier pared back its adjusted profit forecast to a range of $3.23 to $3.25 a share, down from $3.30 to $3.50. It also reduced its outlook for full-year cash flow. Shares plunged as much as 11% as trading got underway on Wednesday, the most since May 2020. They regained some of those losses and were down 8% at 10:28 in New York.
Demand is “not improving as quickly as we were expecting,” Chief Executive Officer Enrique Lores said in an interview. An inventory glut weighed on computer prices and businesses were putting off purchases amid job cuts and a broader pullback in spending, Lores said. He also cited weaker demand in China.
PC makers have been struggling to stage a comeback since sales fell off a cliff in a post-pandemic bust. HP had been hoping for a more robust recovery in the second half of 2023 with back-to-school and holiday seasons bolstering sales. Tuesday’s outlook cuts have instead thrown the timing of any significant rebound into question.
Fiscal third-quarter revenue dropped 9.9% to $13.2 billion, falling short of analysts’ estimates. Consumer PC sales were better than anticipated, but sales to businesses disappointed with a decline of 11%.
The commercial results reinforced concerns about tighter corporate spending, Bloomberg Intelligence analyst Woo Jin Ho said in a note after the results. Morgan Stanley said the company’s report points to renewed headwinds for its print business, calling the segment “most concerning” and warning that it might limit earnings growth.
Printing revenue fell 7% to $4.3 billion. Analysts, on average, expected $4.57 billion, according to data compiled by Bloomberg.
Despite being “in a tough market environment,” Lores touted a report from industry analyst IDC showing HP gained on its rivals in the quarter. “The rebound has started to happen,” he said. “It just will be less accelerated than we expected a quarter ago.”
Hewlett Packard Enterprise Co., which was created in 2015 when the original HP split its operations in two, was more optimistic about business spending. HPE, which sells enterprise products and services, boosted its annual profit outlook in announcing results on Tuesday. But it saw difficulty in computing sales, as it’s also navigating a “challenged corporate IT spending environment,” according to Bloomberg Intelligence’s Ho. The shares were little changed at $16.82 in New York at 10:20 a.m.