HP's Personal Systems: A Strategic Play in the Post-Pandemic PC Market

The global PC market is experiencing a reacceleration of demand, driven by enterprise and education sectors navigating the post-pandemic landscape. For HP Inc., this presents a critical inflection point. With its Personal Systems segment accounting for 67.6% of total revenue, the company's ability to capitalize on this recovery will determine its long-term competitiveness. As of Q2 2025, HP reported a 3.3% year-over-year increase in Personal Systems revenue, a modest but meaningful sign of stabilization. However, the broader context—shifting supply chains, AI-driven innovation, and the looming end of Windows 10 support—suggests that HP's strategic positioning could unlock more robust growth.

The Post-Pandemic PC Renaissance

The PC market's recovery is no longer a speculative narrative but a data-driven reality. According to Gartner, global PC shipments hit 63 million units in Q2 2025, a 4.4% year-on-year increase. This growth is fueled by two key trends: enterprise device upgrades and the adoption of AI-enabled hardware. Enterprises, particularly in the U.S., are accelerating refresh cycles to align with Windows 11 migration timelines and mitigate inventory risks tied to U.S. tariffs on Chinese imports. Meanwhile, the education sector is embracing AI PCs for their ability to enhance productivity and adapt to hybrid learning environments.

HP, as the world's second-largest PC vendor, is uniquely positioned to benefit. Its focus on commercial clients—48% of total revenue in 2024—aligns with the enterprise-led recovery. In Q2 2025, HP's Commercial PS segment grew 9% year-over-year, outpacing the 2% rise in Consumer PS. This divergence underscores the structural shift in demand: businesses are prioritizing technology investments, while consumer demand remains subdued.

Strategic Leverage: AI, Manufacturing, and Enterprise Partnerships

HP's recent initiatives highlight its intent to dominate the next phase of the PC cycle. The company has prioritized AI integration, with AI PCs already accounting for 15% of Q2 2025 sales. These devices, equipped with NPUs for local AI processing, are becoming essential tools for enterprises seeking to automate workflows and enhance user experiences. HP's roadmap aims to increase AI PC sales to 25% of its PC business by 2026, a target that could drive both revenue and margin expansion.

Manufacturing diversification is another cornerstone of HP's strategy. By shifting 90% of North American PC production out of China by mid-2025, the company is mitigating tariff-related costs and supply chain risks. This shift, however, comes with short-term pain: Q2 2025 saw a 100-basis-point decline in non-GAAP operating profit due to higher production costs. Yet, these investments are laying the groundwork for long-term resilience.

Enterprise partnerships further strengthen HP's position. The company is embedding AI-driven security frameworks, such as Zero Trust architectures, into its solutions, addressing a critical pain point for businesses. Additionally, HP's collaboration with Microsoft to optimize Windows 11 for AI workloads positions it as a key player in the enterprise software-hardware ecosystem.

Financial Realities and Investor Considerations

Despite these strengths, HP's financials reveal a mixed picture. While Personal Systems revenue grew 3.3% in Q2 2025, earnings per share (EPS) fell 13.4% year-over-year to $0.71, missing analyst estimates. This underperformance reflects broader challenges in the PC industry, including thin margins and pricing pressures. However, HP's Q3 2025 guidance—$0.68 to $0.80 EPS—suggests confidence in stabilizing its bottom line.

Historically, HPQ's stock has shown mixed reactions to earnings misses. For instance, following a $325 million miss in January 2024, the stock initially dropped 2.56% over 10 days but rebounded with an 11.44% gain by the 30-day mark. A support level at $26.42 has historically prevented further declines, tested multiple times since 2022 without being breached.

Investors must also weigh HP's cost-cutting initiatives. The “Future Ready” plan aims to generate $1.9 billion in annualized savings by 2025, a critical lever for improving profitability. If successful, these savings could offset ongoing tariff costs and fund R&D in AI and enterprise solutions.

The Road Ahead: Opportunities and Risks

HP's path to sustained outperformance hinges on three factors:
1. Enterprise Adoption of AI PCs: If AI PCs become a standard requirement for businesses, HP's leadership in this space could drive revenue growth.
2. Supply Chain Resilience: Continued manufacturing diversification will reduce exposure to geopolitical risks and stabilize costs.
3. Execution on Cost Savings: Delivering on the $1.9 billion savings target is essential for improving margins and investor confidence.

Risks remain, however. Consumer demand is still weak, and the PC market's growth rate, while positive, is modest compared to other tech sectors. Additionally, HP's reliance on enterprise clients exposes it to macroeconomic volatility—any slowdown in corporate IT spending could dampen results.

Investment Thesis

For investors, HP represents a cautiously optimistic opportunity. The company's focus on enterprise and education markets, combined with its AI and manufacturing strategies, positions it to outperform in a recovering PC cycle. While near-term earnings volatility is likely, the long-term potential for margin expansion and market share gains is compelling.

A disciplined approach is warranted. Investors should monitor HP's Q3 2025 earnings report on August 27, 2025, for clarity on its ability to meet revenue guidance and stabilize EPS. Those with a medium-term horizon may consider entering positions at current levels, given the stock's 7.2% discount to the mean price target of $27.55. However, patience is key: HP's full potential will unfold over the next 12–18 months as AI PCs gain traction and supply chain adjustments mature.

In a world where hybrid work and AI-driven productivity are reshaping industries, HP's Personal Systems segment is not just a relic of the past—it is a bridge to the future. Whether it can cross that bridge successfully will depend on its ability to execute, innovate, and adapt. For now, the data suggests it is on the right path."""