None of the major computer companies have released last quarter's earnings results yet. But they're likely to be disappointing.
That's the bigger takeaway from International Data Corp.'s most recent look at quarterly PC sales, anyway. Already slowing down from the pandemic-driven buying boom, demand for personal computers plummeted in the third quarter, boding poorly for most of the industry's upcoming earnings reports. It's the last thing the already struggling technology sector needs right now.
PC shipments are down ... again
All told, computer shipments fell 15% year over year to 74.3 million last quarter, rising just slightly from the second quarter's suppressed figure. That's not a huge mathematical stumble, but it is significant by the slow-moving PC market's standards. It's also the second consecutive quarter the industry has suffered such a slowdown.
HP (HPQ 0.18%) led the way lower, with its PC shipments down nearly 28% compared to Q3 2021's tally, although Dell Technologies (DELL 4.00%) wasn't far behind with a year-over-year decline of more than 20%. Lenovo's deliveries slipped a tad over 16%.
Data source: International Data Corporation. Chart by author.
Apple (AAPL 0.33%) is the one bright spot, with unit sales surging over 40% versus the third quarter of last year. IDC, however, also points out Apple's promotional efforts during Q3 may have played a key role in the company's ability to buck the bigger trend. And even so, it wasn't enough to offset the business's broad slowdown.
IDC also notes that after several quarterly increases linked to COVID-19, the average selling price for a new PC has now fallen for two quarters in a row, underscoring the fresh headwind.
Too much full-year confidence?
For better or worse, this headwind may already be factored into the upcoming quarterly earnings reports for most of these names.
Take Dell for instance. Analysts are collectively calling for more than a 13% year-over-year revenue dip for the three-month stretch ending this month, driving per-share profits down from $2.37 a year ago to $1.61 per share. HP's earnings are expected to slide from $0.94 for the comparable quarter of last year to only $0.85 per share this time around, thanks to an 11% year-over-year sales slump. That's better than Dell's by virtue of being less bad. Just bear in mind HP also operates a printing business that's considerably more consistent than its PC venture. Apple's revenue is even more diversified, with the bulk of it still consisting of sales of its popular iPhone.
Still, seeing their worst fears confirmed in writing has the potential to rattle investors, who may already be uneasy about the overall condition of the market.
Perhaps the greater concern here, however, should be the trend IDC is pointing out that isn't yet reflected in these companies' earnings outlooks. While the quarters ending this month are expected to be poor ones, that same doubt doesn't apply to the whole year.
HP's fiscal 2023 (ending in October of next year) top line is projected to be lower by only a little over 4%, and matched by a comparable contraction in earnings. Following several quarters' worth of significant sales slowdown and two consecutive quarters of lower selling prices, though, it's not inconceivable that the coming year's expectations are set to be dialed back.
Ditto for Dell. The analyst community is calling for flat sales for the fiscal year ending in January, yet is still modeling a per-share profit improvement from $6.22 last year to $6.78 this time around. A weaker-than-expected quarter -- and weaker-than-expected PC market -- could force analysts as well as investors to reel in their expectations. That, too, could prompt investors to rethink their positions in the stock.
Not even the venerable Apple is necessarily immune to the industry's struggles. While it's still predominantly an iPhone company, the personal computer market's weakness may reflect consumers' growing worries about the current condition of the economy.
Better out than in
Only time will tell just how much of a toll the fading PC market is taking on computer makers' bottom lines. But, not much more time is needed. HP will report its fiscal fourth-quarter numbers sometime in late November, while Dell will post its Q3 numbers around that same time. Apple's fourth-quarter numbers are coming near the end of this month.
Given what is known about waning PC demand from IDC's data, this is a case where it makes more sense to be out of these stocks and on the sidelines, waiting for a clear reason to get back in.
