Personal computer and printer maker HP Inc. has gotten off to a strong start in 2017, reporting better-than-expected fiscal first-quarter earnings.

The company reported a profit of $600 million, or 36 cents per share, on revenues of $12.7 billion, up 4 percent from a year ago. Profit before certain items such as stock compensation was 38 cents a share, a penny above Wall Street’s estimate of 37 cents a share.

HP also issued guidance for the current quarter, projecting adjusted earnings of 37 to 40 cents per share, which fell in line with Wall Street’s 39-cent estimate. In after-hours trading, HP’s share price rose almost 2 percent, to $16.50.

The company put its first-quarter success down to a strong showing in the PC market. HP’s personal systems unit, which includes laptops, desktops and tablets, saw revenues rise by 10 percent from a year ago, to $8.2 billion. It also saw its first significant revenues from 3D printers, though overall printing revenues slumped by 3 percent as printer supplies revenues fell.

“HP Inc. had a very, very strong Q1 earnings, above what many predicted,” Patrick Moorhead, principal analyst at Moor Insights & Strategy, told SiliconANGLE. “The growth was across every segment in every region, so it wasn’t just one or two things at play.”

PC sales surge

Cathie Lesjak, HP’s chief financial officer, told analysts the company had “definitely seen” an improvement in the PC market. She attributed the rise in sales to video gamers buying high-end machines, increased demand for “detachable” laptops that can also function as tablets, and Microsoft’s decision to discontinue its free operating system upgrade, which means buyers now have to purchase a new PC if they want to get a free copy of Windows 10.

HP also benefited from its renewed focus on the high-end PC market, which impacted sales in both the consumer and commercial markets, Moorhead said. “HP embraced the premium Windows PC space and this continues to pay off in consumer and commercial markets,” he said. “HP placed an emphasis on design and software experience, and has also done incremental work to extend the experience to the channel, so the premium PC products connects with a premium channel experience.”

But despite the rekindled interest in PCs, Lesjak warned of a sequential decline in sales as the previous quarter was boosted by winter holiday purchases. She said the company still sees a “fair amount of uncertainty” around PCs in 2017, partly because of the rising costs of components. HP has already increased the price of many of its computers to compensate for that and will likely do the same for others later this year. As such, Lesjak warned that some potential customers may be put off by these higher prices and buy their computers from cheaper rivals.

Still, some analysts saw promise in a slower rate of decline in printer supplies, traditionally a cash cow. “The company indicated that supplies revenue could actually grow beyond FY17, which we believe longer-term investors will find encouraging,” Barclays Capital Inc. analyst Mark Moskowitz said in a note to clients.

3D printing: next big revenue stream?

HP also reported revenue from its Multi Jet Fusion 3D printers for the first time. The company didn’t report specifics but said the numbers were included in its breakdown of segmented revenues for its printer division. It’s an important milestone for the 3D printer market as a whole, because many analysts are expecting the company to dominate in this emerging space.

“Of special note was that the company registered their first 3D printer revenue,” Moorhead said. “HP has the strategic and scale lead and I can see a scenario where they could dominate this market in three to five years when the industry moves to real production parts off a 3D printer at scale.”

Photo: HP