HP Inc.: Navigating the Post-Pandemic PC Market and Enterprise Services Growth

In the ever-evolving tech hardware sector, HP Inc. (HPQ) has emerged as a critical player navigating the post-pandemic landscape with a blend of resilience and innovation. The company's fiscal Q3 2025 earnings report, released on August 21, 2025, offers a compelling snapshot of its strategic positioning in the PC market and enterprise services growth. For investors eyeing the tech hardware sector, HP's performance and forward-looking guidance present a nuanced case for long-term consideration.

Q3 Earnings: A Tale of Two Segments

HP's Q3 2025 results revealed a stark contrast between its Personal Systems and Printing segments. The Personal Systems division delivered $9.9 billion in revenue, a 6% year-over-year increase, driven by 8% growth in consumer PCs and 5% growth in commercial PCs. This outperformance was fueled by the adoption of Windows 11 and early traction in AI PCs, which accounted for 15% of shipments in early 2025 and are projected to reach 25% by year-end.

Conversely, the Printing segment faced headwinds, with $4.0 billion in revenue—a 4% decline year-over-year. Consumer Printing revenue dropped 8%, while Commercial Printing fell 3%, reflecting broader market saturation and competitive pressures. Despite this, the segment maintained a robust 17.3% operating margin, underscoring HP's pricing discipline and cost management.

Strategic Positioning: AI PCs and Supply Chain Resilience

HP's long-term success hinges on its ability to adapt to two megatrends: the Windows 11 migration cycle and the rise of AI-powered hardware. The company's CEO, Enrique Lores, emphasized that AI PCs are now a core growth driver, with enterprise demand outpacing consumer adoption. HP's acquisition of Humane AI and its investment in AI-integrated hardware have positioned it to capture a significant share of this emerging market.

Meanwhile, HP's supply chain reconfiguration has proven critical. By shifting 90% of North American PC production to Vietnam and India, the company has mitigated the impact of U.S. tariffs and reduced costs. This move, combined with a $1.9 billion cost-cutting initiative (including workforce reductions and IT optimization), has stabilized margins and improved free cash flow.

Competitive Landscape: Market Share and Growth Rates

HP's 21.6% global PC market share in 2025 places it second to Lenovo's 24.5% but ahead of Dell's 14.4%. While Lenovo's 13% year-over-year growth in its Intelligent Devices Group (IDG) is formidable, HP's 10% commercial PC sales growth and 15% AI PC shipment penetration highlight its niche in enterprise and premium segments.

Dell, meanwhile, faces challenges in its consumer division, with 19% year-over-year declines, while its enterprise services growth—driven by hybrid cloud solutions and AI servers—remains strong. HP's $1.5 billion in free cash flow for Q3, coupled with its $2.9 billion in gross cash reserves, provides a financial buffer to invest in R&D and strategic acquisitions, further widening its competitive edge.

Valuation Metrics: Undervalued or Overlooked?

HP's valuation appears attractive on paper. The company trades at a trailing P/E of 9.62 and a forward P/E of 8.15, significantly below the industry average of 20.6x. Its EV/EBITDA of 6.90 and EV/Sales of 0.64 also suggest a discount to peers. However, the negative PEG ratio of -0.84 (due to declining EPS growth) and a debt-to-equity ratio of -9.34 raise concerns about earnings sustainability and leverage.

Despite these risks, HP's free cash flow projections—expected to grow to $5.2 billion by 2035—and its $65.18 intrinsic value per DCF model (compared to a current price of $26.47) suggest a compelling long-term opportunity. The market's current 59.4% discount to intrinsic value implies a margin of safety for investors willing to bet on HP's AI and enterprise services growth.

Investment Thesis: A Calculated Bet

For investors considering HP, the key question is whether the company can sustain its AI PC momentum and enterprise services growth while managing its debt load. HP's strategic moves—production diversification, cost-cutting, and AI integration—position it to outperform in a PC market expected to grow 4.1% in 2025.

However, risks remain. The negative PEG ratio and debt-to-equity ratio signal financial fragility, and the Printing segment's decline could weigh on margins if not offset by AI PC gains. Investors should monitor HP's Q4 guidance (GAAP EPS of $0.75–$0.85 and non-GAAP EPS of $0.87–$0.97) and its ability to maintain $2.6–$3.0 billion in annual free cash flow.

Conclusion: A Long-Term Play with Caution

HP Inc. is a mixed bag: a leader in AI PCs and enterprise services with a compelling valuation, but burdened by debt and a challenging Printing segment. For investors with a 5–10 year horizon, HP offers a unique opportunity to capitalize on the Windows 11 and AI PC transition while benefiting from its undervalued stock price. However, those with shorter timeframes or risk aversion should wait for clearer signs of earnings stabilization.

In the post-pandemic tech landscape, HP's ability to balance innovation with fiscal discipline will determine its success. For now, the data suggests a buy for long-term investors willing to navigate the near-term volatility.