Markets continue to weaken and stock prices plummet

The continued impact of the post-epidemic period has prevented the PC market from returning to its peak during the epidemic. The latest earnings reports from HP and Dell show that their PC businesses are still weak, and their stock prices have plunged 11% and 12.25% respectively after the release. The PC business of these two companies has a significant impact on overall results, especially HP, whose PC business remains its main source of revenue.

Market demand dropped sharply and sales showed no sign of recovery

According to market research firms Gartner and IDC, global PC sales peaked in 2020 and 2021 due to the surge in demand for home work and study during the epidemic, and sales increased significantly, an increase of 29% compared with before the epidemic. However, this growth has not continued, with global PC sales falling 27% in 2023 compared with 2021 and still 6% lower than before the epidemic. Even in the third quarter of 2024, sales are the same as last year and show no signs of significant recovery.

Recovery expectations have not been realized, and renewal demand has not driven the market

Analysts had expected that the market would recover in the second half of 2024 due to three main factors: First, PCs purchased in 2020 and 2021 have been in use for three to four years and may need updates; second, the penetration rate of Windows 11 is slow, and Microsoft plans to end free support for Windows 10 in 2025, which will prompt users to consider upgrades; third, the launch of new AI PCs may stimulate demand. However, these expectations have not been realized, and the market's recovery has been slower than expected. HP's PC sales have grown by only 3% in the past nine months, but are down 16% compared to 2021; Dell's PC sales have dropped 2% from last year and 17% from 2021.

Demand for AI PCs fell short of expectations, and it is still an alternative purchase

Although advances in AI technology have brought some hope to the market, sales growth of AI PCs has still failed to stimulate new demand. According to HP's report, AI PC shipments accounted for 15% of its total shipments in the first quarter, but overall PC shipments grew by only 1%. Consumers still seem to be waiting for more attractive AI features or more valuable upgrade options, so demand for AI PCs is mainly focused on alternative purchases rather than new consumer demand.

Extended replacement cycle, Windows 10 paid support reduces incentive to upgrade

Gartner's report points out that many companies and consumers have chosen to extend the replacement cycle for PCs to five to six years, making it easier to replace some older PCs even if they have begun to age. Free support for Windows 10 will end in October 2025, but users can still pay $30 to receive Microsoft's one-year extended security support. This has made many users less eager to upgrade to Windows 11, especially for large IT departments, where the cost of extending Windows 10 is much lower than updating a new PC.

Uncertainty in the economic environment and market saturation exacerbate the dilemma

In addition to the above factors, the uncertainty of the overall economic environment also affects the purchasing decisions of companies and consumers. Many people choose to defer large expenditures, especially high-priced PC equipment. In addition, during the epidemic, many households and businesses have purchased new PCs due to the surge in demand for remote work and learning, which has led to a short-term peak in market demand, which has subsequently become saturated and led to a fall in sales.