HP says AI PCs now make up a quarter of its sales, boosting revenue thanks to their higher price tags and the Windows 11 refresh.

The PC and printer maker said that its Personal Systems revenue was up 6 percent year-on-year to $9.9 billion during its financial third quarter ended July 31. This was driven in the commercial segment by the Windows 11 refresh and increased AI PC adoption, according to president and CEO Enrique Lores.

“We continue to shift our mix to higher value segments such as AI PCs, commercial premium and services,” Lores said on a conference call to discuss the results.

The HP leader professed himself pleased with what he sees as accelerating demand for the AI-capable PC category, which he said grew in revenue by double digits since the last quarter.

“It has surpassed our expectations with shipments continuing to ramp, now reaching over 25 percent of our mix, a quarter ahead of our plan,” he chirped. The company had previously said it wasn’t expecting PCs with AI pixie dust to reach 25 percent before the end of the year.

HP sure hopes this is a real trend, and not just some blip in the figures. “We think this is real demand because it’s not only happening in the US, we are seeing this across multiple countries and across multiple geographies,” Lores told one analyst. “In terms of our projections going forward, they rely on the fact that we continue to see strong demand for AI PCs, strong demand for Windows 11.”

This is despite the lack of any real killer app that benefits from using the special AI hardware – Intel says an AI-ready PC should have a CPU, GPU, and an NPU (neural processing unit) inside – and HP’s admission that AI PCs are costlier than a comparably specified standard PC.

“We are seeing an uplift in pricing of AI PCs compared to similar units that don’t bring this capability,” Lores said, adding that this equates to about a 5 to 10 percent price increase.

Of course, HP and the other major PC makers are forcing the situation somewhat by pushing more and more of these machines into sales channels, so that buyers find it harder to avoid buying an AI-capable unit, as The Register previously reported.

On the lack of a killer app, Lores claimed the industry is working on this, and software support is coming.

“The key thing behind the AI PCs is the fact that over the next quarters, more and more software applications are going to take advantage of the capabilities that the AI PCs have,” he claimed.

He cited the example of Adobe and Zoom, which are shifting workloads locally to take advantage of the NPU, “which means it will be faster and also it will reduce some of the cloud costs that they will be having,” Lores claimed.

“We have seen security companies like CrowdStrike taking advantage of the ability to use the NPU to scan the memory faster, which means for many of their applications, this brings a significant advantage,” he said, “Also, Microsoft is doing a remarkable job continuing to improve the libraries that they offer to other companies, so they can do a lot of activities in the PC that before they had to do in the cloud.”

Research biz Gartner believes AI-capable kit will account for 31 percent of the total PC market globally by the end of this year, and could hit 54 percent next year. After that, it may become increasingly difficult to buy any PC that isn’t AI-capable.

However, the market watchers say that Arm-based laptops will expand to take a larger share of the consumer market, while business users unsurprisingly prefer to stick with x86 on Windows.

Gartner also expects to see many software vendors prioritize support for AI capabilities running directly on PCs – it puts the figure at 40 percent, up from just 2 percent in 2024 – including multiple small language models (SLMs) deployed locally on PCs.

How much of this software support will turn out to be a bit of AI injected into applications for marketing reasons rather than because it fulfills a genuinely useful purpose remains to be seen. Mozilla appears to be a recent example here.

Back to HP, and the firm’s printer biz didn’t fare as well as PCs, bringing in $4 billion in revenue, down 4 percent on the same period last year. The company blamed this on “a slightly softer than expected office market and a pricing environment that remained competitive despite rising trade-related costs across the industry.”

Lores also said that enterprise and commercial businesses are prioritizing other areas – such as PC upgrades – above print, which is affecting sales.

Those rising trade-related costs refer to the Trump administration’s tariffs and the uncertainty caused by its constantly shifting policies.

Lores said that HP is making good progress here in mitigating increased costs through pricing adjustments and supply chain diversification, and is dodging tariffs by not shipping kit made in China to the US.

“This quarter, as planned, nearly all products sold in North America are now built outside of China, helping to further reduce trade-related costs. We continue to ramp up production across Vietnam, Thailand, Mexico, and the US,” he said.

Ironically, chief financial officer Karen Parkhill revealed that HP’s revenue grew by 11 percent in Asia-Pacific and Japan, with particularly strong personal systems performance in China.

Looking forward, HP still sees Windows 11 and AI PCs as where the money will be, driven by continued momentum in the PC refresh and the holiday season uptick in consumer spending coming in the next quarter.

“When we look at where are we in the cycle, our estimate is that slightly more than 50 percent of the installed base has been converted to Windows 11,” Lores said, “which is why I think the demand for PCs is going to continue in Q4. We projected that the growth of PCs will be mid-single digits for the second half and that there will be growth in fiscal year 2026.” ®