After 2 years of declines, the PC market is showing signs of life

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After two years of steady, agonizing declines, the PC industry appears to have hit rock bottom. And, according to research firm Gartner, things could be looking up, which should spell good news for manufacturers ranging from Apple (AAPL) to HP (HPQ) and Windows maker Microsoft (MSFT).

“There is evidence that the PC market’s decline has finally bottomed out,” Mikako Kitagawa, research director at Gartner, said in a statement.

“Seasonal demand from the education market boosted shipments in the third quarter, although enterprise PC demand remained weak, offsetting some growth. Vendors also made consistent progress towards reducing PC inventory, with inventory expected to return to normal by the end of 2023, as long as holiday sales do not collapse,” she added.

PC manufacturers shipped 64.3 million units in Q3, a 9% year-over-year decline. Still, that’s better than the 16.6% decline the industry saw in Q2.

The PC industry has been hammered over the last eight quarters thanks to the COVID-related slowdowns, inflation, and rising interest rates. PC companies initially were riding high during the pandemic as consumers looked for ways to work and play at home during long lockdowns. But as stay-at-home orders lifted, sales fell off of a cliff.

Inflationary pressures and high interest rates, meanwhile, made it difficult for some consumers to find the cash for new computers, as both prices and financing costs rose. PC shipments subsequently plummeted to their worst levels in decades.

In January, Gartner reported that PC shipments dropped a staggering 28.5% year over year, the largest year-over-year decline since the company began tracking shipments in the mid-1990s.

Computer laptops sit on display in a Costco warehouse Wednesday, Sept. 13, 2023, in Sheridan, Colo. (AP Photo/David Zalubowski)
Laptops sit on display in a Costco warehouse Wednesday, Sept. 13, 2023, in Sheridan, Colo. (David Zalubowski/AP Photo) (ASSOCIATED PRESS)

But the market appears to be turning around, as inventory levels drop and more people seek out newer PCs.

“The good news for PC vendors is that the worst could be over by the end of 2023,” Kitagawa said. “The business PC market is ready for the next replacement cycle, driven by the Windows 11 upgrades. Consumer PC demand should also begin to recover as PCs purchased during the pandemic are entering the early stages of a refresh cycle.”

Still, third quarter declines will sting some companies especially hard. Apple, for instance, saw a 24.2% drop in PC shipments in the quarter. Gartner says the steep fall is a result of tough comparisons to Apple’s Q3 2022 when demand surged following manufacturing disruptions caused by COVID lockdowns in China.

While 2023 will be a wash for the industry overall, Gartner says the PC market should recover in 2024, with shipments expected to grow 4.9%, as both consumers and enterprise customers stock up on new systems.

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Daniel Howley is the tech editor at Yahoo Finance. He's been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.

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