AI PC Adoption and Impact
Q: How will AI PCs affect sales and ASPs?
A: HP expects AI PCs to represent around 10% of shipments in the second half. The impact will be more significant in 2025 and 2026, with AI PCs comprising 40% to 60% of sales three years after launch. They anticipate AI PCs will drive an improvement in average selling price of between 5% and 10%.

Recovery in Commercial PCs
Q: Are you seeing a recovery in commercial PC demand?
A: Yes, for the first time in eight quarters, HP saw growth in its PC business, with commercial being the highlight. Growth was consistent across North America and Europe, and between enterprise and SMB. Key drivers include the aging installed base and initial Windows 11 refresh activity. The funnel of opportunities for the second half is significantly larger than last year , and they expect this momentum to continue.

China Market Outlook
Q: What is the outlook for China demand?
A: HP did not see improvement in demand in China during the second quarter for either print or personal systems. They have not included any improvement in projections for the second half and expect the economic situation to remain challenging in China.

Print and PC Margin Outlook
Q: How do you see margins evolving in Print and PC businesses?
A: HP expects Print operating margins to be in the upper half of the long-term 16% to 19% range in Q3 and at the upper end for the full year. For the PC business, they expect margins to remain in the 5% to 7% range, with no change to previous guidelines. Future Ready savings are helping deliver margin rates even in a challenging demand environment.

Inventories and Strategic Buys
Q: Why are inventory levels higher than pre-pandemic?
A: The higher inventory levels are primarily due to strategic buys and sea shipments . There is no major structural change; subscription models do not impact inventory levels. HP continues to improve operational inventory to offset these decisions.

Subscription Revenue Growth
Q: How is the subscription business performing?
A: HP does not disclose specific numbers but reports growth in net subscribers and revenue in the consumer services space integrating all subscription models. They expanded their portfolio with new offerings like the all-in model including the printer. The goal is to grow this business to offer better value to customers and capture more value per customer, building a more accretive business.

Share Buybacks
Q: Why were share buybacks lower this quarter?
A: HP has not changed its approach and continues to aim to return 100% of free cash flow to investors unless better ROI opportunities are identified. While leverage stays below 2, investors should expect HP to continue returning 100% of free cash flow over time.

Revenue Below Pre-COVID Levels
Q: Why are revenues still below pre-COVID levels?
A: The print and office markets are smaller than they used to be, impacting overall size. Despite recovering share in PCs, HP is still not at pre-pandemic levels and aims to continue growing share. Multiple factors contribute, and HP plans to discuss projections versus 2019 in more detail in Q4.

Video Conferencing Demand
Q: How is demand for video conferencing equipment?
A: Demand has been limited as enterprises have been restricting investment. However, there is some quarter-on-quarter momentum, especially in video conferencing systems, which is expected to continue in the second half. HP believes hybrid work will remain important, making this a long-term growth opportunity.

Battery Life in AI PCs
Q: How will AI PCs impact battery life?
A: Battery life is a key differentiator in HP's next-generation AI PCs, with over 30 hours of battery life. This is achieved using ARM technology and built-in language models that optimize PC utilization based on user behavior, significantly impacting battery savings on both ARM and x86 products.