HP INC Q1 FY2025 earnings call

• Q1 Results: Delivered top line revenue growth of 2% year-over-year for the third consecutive quarter, with non-GAAP earnings per share of $0.74. Operating profit margins for Print and Personal Systems in line with expectations.
• Strategic Focus: Doubling down on commercial segment and aggressively investing in AI and software capabilities; acquired strategic assets from Humane to accelerate intelligent ecosystem across devices; realigned key growth areas, with gaming managed as part of core portfolio.
• Innovation Highlights: Showcased AI-powered innovations at CES, including new AI PC models, Thunderbolt Docks for hybrid workers, OMEN AI beta in gaming, and expanded print innovation like adding Smart Tank printers to all-in subscription plans.
• Supply Chain and Cost Management: Built globally diverse supply chain, with plan to have more than 90% of HP products sold in North America built outside of China by end of fiscal year 2025; raised gross annual run rate structural savings target for Future Ready plan to $1.9 billion by end of fiscal year 2025.

Personal Systems: Revenue was up 5% year-over-year, with commercial representing over 70% of PS revenue mix for the quarter. Drove strong performance in key growth areas like AI PCs, advanced compute solutions, and hybrid systems. Commercial revenue up 10% on 6%-unit growth with stronger pricing and mix shift towards premium, while consumer market revenue down 7% on lower volume. Print: Total print revenue down 2% but increased market share, with strong performance in consumer hardware. Consumer subscriptions revenue grew double-digit, and industrial graphics maintained momentum. Consumer grew 5% year-over-year on 7%-unit growth with double-digit growth in big tank. Commercial units flat year-over-year, revenue declined 7% in competitive pricing environment, but gained share in higher value categories. Revenue declined 1% in constant currency year-over-year for print business, but operating margin was at the high end of range.

• Non-GAAP diluted net earnings per share expected in range of $3.45 to $3.75 for full-year 2025. Q2 non-GAAP diluted EPS expected $0.75 to $0.85, GAAP diluted net earnings per share $0.62 to $0.72.
• Personal Systems expected to grow faster than the market, driven by share gains in commercial and focus on premium categories including AI PCs. Print revenue expected to grow at least in line with the market in fiscal year 2025.
• PS operating margins expected in upper half of 5% to 7% range for the year. Print operating margins expected near top of 16% to 19% long-term range.
• Included added cost driven by current tariffs on China in guides; will leverage global supply network and pricing actions to mitigate impacts.

• Geopolitical developments and tariff changes pose uncertainties, though measures like global supply chain diversification and Future Ready cost savings are in place to mitigate.
• Competitive market conditions in print, especially in office with weak demand in China and competitive pricing, which push for improved operational execution.

Q: Can you quantify the impact of the China tariff and the guidance, and how are you expecting that to trend through the year, given the mitigation efforts outlined?

A: Karen Parkhill said known impacts of tariffs are included in guide, mostly impacting PS business. Enrique Lores added they are leveraging global supply network and future ready cost reductions to mitigate, and can take pricing actions as needed.

Q: Do you have any updates on customer adoption of AI PCs?

A: Enrique Lores said current expectation is penetration of AI PCs at end of 2025 will be more in 25% range, continuing to expect 40% to 50% adoption rate into calendar year 2027, and average selling price expectation between 5% and 10% higher than traditional PCs.

Q: How do you think about the PC industry growth rate for this year and layering on price increases?

A: Enrique Lores said projections for market are mid-single-digit growth for units, and expect pricing to have positive impact on top of that, with HP expecting to grow faster than the market.

Q: What kind of back-to-office assumptions have you put into your assumptions for print?

A: Enrique Lores said not assuming radical change in back-to-office assumptions, situation expected to remain fairly stable in coming quarters.