Half of PCs still run Windows 10 despite looming end of support, PC makers say

Dell and HP executives anticipate a multi-year PC upgrade cycle extending through 2026, driven by the impending Windows 10 end-of-life, with nearly 50% of existing PCs still on the older OS and enterprises leading the refresh. Concurrently, AI PC shipments are rapidly accelerating, with HP exceeding targets and Gartner projecting AI PCs to comprise over 50% of sales by 2026. This transition, combined with supply chain reconfigurations due to tariffs, is driving a general increase in PC prices, signaling sustained demand, an evolving product mix, and higher costs across the market.

Analysis

The personal computer market is experiencing a confluence of significant catalysts, signaling a multi-year refresh cycle extending through 2026. This cycle is primarily driven by the end-of-life for Windows 10, which still operates on nearly 50% of PCs, creating a large, mandatory upgrade pathway, particularly within the enterprise sector. However, company strategies are diverging. HP Inc. is capitalizing on this environment with robust growth, evidenced by an 8% rise in consumer PC shipments and a 3% increase in commercial shipments year-over-year. The company is aggressively leading the transition to AI PCs, which already comprise 25% of its product mix—a quarter ahead of its internal targets. In contrast, Dell Technologies is exhibiting a more cautious approach; its consumer revenue declined by 7% and overall shipments fell 3.2% in a growing market. Dell's focus appears to be on profitability, achieved through higher average selling prices, and on the enterprise AI server market rather than explicitly on AI PCs. This market-wide upgrade is compounded by rising costs. Both companies are increasing PC prices, driven by a 5-10% premium for AI-enabled models and, more structurally, by the costs associated with shifting supply chains out of China to mitigate tariff impacts. Gartner's projection that AI PCs will constitute over 50% of sales by 2026 underscores this as a fundamental shift in product mix, not just a cyclical refresh.

Key Decisions for Investors

• Investors should recognize the PC market is supported by a multi-year structural tailwind from the Windows 11 upgrade cycle, but should differentiate between HP's aggressive growth strategy in AI PCs and Dell's focus on profitability and enterprise AI hardware.
• Monitor average selling prices (ASPs) and gross margins, as price hikes from both the AI PC mix and tariff-related supply chain costs are a key driver for profitability but could also temper volume growth, especially in the budget-sensitive SMB segment.
• Consider that HP appears better positioned to capture near-term growth from the AI PC trend, given its reported 25% mix and strong shipment figures, while Dell presents a more defensive play focused on higher-margin enterprise sales.
• Factor in the risk of a prolonged and uneven refresh cycle, as small businesses may opt for Microsoft's paid Windows 10 extended support, potentially delaying hardware purchases and creating less predictable quarterly demand.