Could This Be a Sign That a Big Refresh Cycle in Tech Is Coming?

Technology doesn't last forever, and consumers typically upgrade their phones, computers, and other devices after a number of years. This is to ensure they have the latest features, and also so that they are compatible with other devices. It's an inevitable and continuous cycle. Amid inflation, however, consumers have been holding off on upgrading devices for longer than normal.

Nowadays, with the latest tech featuring artificial intelligence (AI) and significant advancements that can improve productivity and the overall user experience, there's much more of a reason to upgrade and for a refresh cycle to take place. One major retailer recently reported earnings, which seemed to suggest that such a cycle may already be beginning.

Image source: Getty Images.

Best Buy posts strong numbers in Q3 and upgrades its guidance

On Nov. 25, Best Buy (NYSE: BBY) reported its latest earnings numbers for the period ending Nov. 1. The retailer is often a go-to place for consumers who are buying tech gadgets and devices. And right now, demand looks to be strong.

Best Buy reported $9.67 billion in sales for Q3, which was better than the $9.59 billion that analysts were expecting. Its adjusted earnings per share (EPS) of $1.40 also soared past Wall Street estimates of $1.31. On top of that impressive performance, management also hiked its guidance in light of the strong numbers.

Here are the key numbers it upgraded with respect to its top and bottom lines, for the full fiscal year (which ends in January):

Data source: Company earnings. Table by author.

Management says people are upgrading tech due to new innovative features

What was particularly noteworthy about Best Buy's latest numbers is that management said that consumers were showing they were willing to spend on upgrades to tech, provided the innovation was justifiable. Matthew Bilunas, the company's chief financial officer, says that this could still be the early phases of a refresh cycle, adding: "Computing is still going to be fueled by the need to replace and upgrade and plus all the ongoing innovation around AI. That will continue into Q4 and likely continue into next year."

Bilunas pointed to the fact that many people are still on Microsoft computers running Windows 10, which the tech giant stopped supporting as of Oct. 14. This bodes well for not only Microsoft and Best Buy, but also other companies that sell computers, including HP and Dell. It's an encouraging development, which suggests that consumers are seeing justifiable reasons to finally pull the trigger on upgrading devices they may have been holding on to longer than normal.

An opportunity for investors to uncover value

Valuations are high for many stocks these days, but there is still an opportunity for solid growth related to tech and retail. Microsoft, for example, reported modest, single-digit growth in its devices segment for its latest quarter (which ended on Sept. 30). If there's an uptick in device spending, that could bolster its overall growth rate and make its forward price-to-earnings (P/E) multiple of 31 much more justifiable.

Dell and Best Buy trade at even cheaper forward P/Es of around 12, while HP is at an even lower multiple of 7. These are examples of stocks that look undervalued today and could be due for rallies, particularly if there is a refresh cycle that is taking place in tech, as they could all benefit from this trend.

All these stocks could make for great buys right now.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Best Buy, HP, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.