HP has a solution to expensive AI tokens: Buy a more expensive PC

HP executives discussed the escalating costs of AI tokens during their third-quarter earnings call, suggesting that businesses could instead invest in more powerful personal computers to handle AI work locally. Ketan Patel, president of HP's Personal Systems business, emphasized that AI PCs are now delivering increased value due to workloads moving from the cloud to the device.

This shift offers benefits such as reduced dependence on network connectivity, faster response times, and the ability to keep sensitive data closer to its source. Companies are already using AI PCs for various purposes, including employee productivity, engineering and design, customer service, and predictive maintenance. The conversation around AI PCs also included concerns about securely managing the growing number of AI agents within enterprise environments.

AI PCs accounted for 46% of HP's PC sales in the quarter, with the company expecting this percentage to increase to between 60 and 70% in fiscal 2027 and beyond 70% in 2028. Patel highlighted that this shift would be marginally beneficial for HP, as the premium-priced AI PCs offer opportunities to sell additional services and security products.

HP's revenue from Personal Systems grew by 18% year-over-year to $11.8 billion, even though PC volumes declined by 16%, due to factors such as higher prices, a richer mix of premium machines, AI PCs, and sales of attached services and peripherals. HP expects to continue raising prices as component costs rise, but it also aims at reducing paper and ink consumption through its Precise Print software, which utilizes AI to remove unnecessary web content before printing.