HP 2025 Q2 Earnings Misses Targets as Net Income Declines 33%

HP (HPQ) reported its fiscal 2025 Q2 earnings on May 29th, 2025. The earnings per share (EPS) and net income both fell short of expectations, as EPS declined by 30.6% to $0.43, and net income dropped by 33.1% to $406 million. The company adjusted its guidance to anticipate the impact of tariffs, predicting non-GAAP diluted EPS for FY 2025 to range from $3.00 to $3.30. HP's revenue increased by 3.3% to $13.22 billion, surpassing analysts' estimates. However, earnings missed expectations, partly due to tariff impacts. The company's guidance for Q3 2025 earnings per share also fell below analyst predictions.

Revenue

HP's revenue for fiscal Q2 2025 rose to $13.22 billion, marking a 3.3% growth from the same period last year. The Personal Systems segment contributed significantly with $9.02 billion in revenue, driven by $6.79 billion from Commercial PS and $2.24 billion from Consumer PS. The Printing segment added $4.18 billion, comprising $2.73 billion from Supplies, $1.17 billion from Commercial Printing, and $289 million from Consumer Printing. Corporate Investments provided $16 million, while Other factors slightly reduced revenue by $1 million.

Earnings/Net Income

HP's EPS in Q2 2025 decreased by 30.6% to $0.43, down from $0.62 in the previous year. Net income also declined by 33.1% to $406 million. This performance reflects a challenging quarter for HP, with both EPS and net income showing significant declines.

Post-Earnings Price Action Review

The strategy of buying HPQ shares following a revenue beat and holding for 30 days provided moderate returns but exhibited notable volatility and risk. The strategy's compound annual growth rate (CAGR) was 9.23%, underperforming the benchmark by 28.84 percentage points. Additionally, the maximum drawdown reached -46.20%, and the Sharpe ratio stood at 0.28, indicating a challenging risk-return profile. These results underscore the importance of effective risk management in navigating HP's stock volatility. Investors must weigh the potential rewards against the inherent risks, considering the historical performance and market conditions influencing the stock's behavior.

CEO Commentary

Enrique Lores, President and CEO, highlighted HP's solid topline growth, driven by the Personal Systems Commercial business, despite challenges from additional tariffs impacting non-GAAP operating profit. He emphasized the success of their Future of Work strategy, with Personal Systems revenue growing 8%, particularly in commercial sectors. Lores mentioned ongoing diversification of manufacturing locations to enhance agility in response to geopolitical changes and expressed optimism about mitigating tariff impacts while focusing on innovation in AI PCs to drive future growth.

Guidance

HP expects FY 2025 non-GAAP diluted net earnings per share to range from $3.00 to $3.30 and GAAP diluted net earnings per share between $2.32 and $2.62. For Q3, the company anticipates high-single-digit sequential revenue growth in Personal Systems, with margins improving to the lower half of the 5% to 7% range. HP forecasts FY 2025 free cash flow between $2.6 billion and $3 billion, emphasizing efforts to mitigate tariff costs and enhance working capital efficiency.

Additional News

In recent developments, HP is accelerating its exit from China due to tariffs impacting profits. HP announced plans to have nearly all North America-bound products manufactured outside China by June 2025. This strategic shift includes increasing production in Vietnam, Thailand, India, Mexico, and the U.S. to mitigate trade-related costs. Concurrently, HP settled a printer toner lockout lawsuit, agreeing to make firmware updates optional, and secured a $50 million boost from the CHIPS Act to adapt inkjet technology for life sciences. These moves underscore HP's efforts to navigate trade challenges and diversify its operations.