HPQ Q3 Earnings Beat Expectations, But Past Misses Suggest Market Caution

Introduction: A Mixed Market Outlook Pre-Earnings

As the third quarter of 2025 came to a close, HP Inc. (HPQ) delivered its latest quarterly earnings report, outperforming expectations in key metrics. The market had been cautiously optimistic heading into the release, with mixed signals from peers in the Technology Hardware, Storage & Peripherals sector. Earnings season typically brings volatility, and for HPQ—given its history of earnings misses—investors were keenly watching how the stock would react to this report.

Earnings Overview & Context

HPQ reported total revenue of $25.985 billion in Q3, exceeding expectations with broad-based performance across its product lines. The company’s operating income stood at $1.887 billion, translating into a net income of $1.229 billion or $1.24 per basic share. These figures reflect solid operational discipline, particularly in managing expenses.

• Total Operating Expenses: $4.024 billion
• R&D and SG&A Combined: $3.835 billion
• Net Income Margin: ~4.73% (based on total revenue)

The earnings per share (EPS) of $1.24 also beat consensus forecasts, indicating stronger-than-expected profitability. These results, combined with stable guidance, may have initially attracted market attention. However, the company’s historical performance with earnings misses adds a layer of caution to this positive outcome.

Backtest Analyses

Stock Backtest: Earnings Misses Historically Penalize HPQ

A backtest of HPQ’s historical earnings misses reveals a consistent pattern of negative returns. Specifically, the stock has shown a 33.33% win rate over three days post-earnings miss, with an average return of -2.82%. The negative trend intensifies over a 10-day horizon, where the average return drops to -5.62%. Although the 30-day win rate improves to 50%, the average return remains negative at -2.58%.

These results imply that investors tend to penalize HPQ aggressively in the short and medium term following earnings disappointments, with limited recovery even within one month. The data reinforces the notion that HPQ’s earnings surprises—particularly on the downside—carry significant downside risk in the near term.

Industry Backtest: Earnings Misses in Tech Hardware Sector Show Mixed Results

In contrast to HPQ’s pronounced negative reaction, the broader Technology Hardware, Storage & Peripherals industry has historically shown minimal directional movement following earnings misses. Over a three-year period, the sector did not demonstrate a statistically significant pattern of returns post-earnings miss. Although some stocks occasionally saw short-term gains (with a maximum observed return of 4.81% around day 20), the overall sector response lacked consistency.

This indicates that for the industry as a whole, earnings misses are not reliable predictors of stock performance. As such, investors may not need to overreact to such events in this sector unless they are specific to a particular company or are accompanied by broader macroeconomic shifts.

Driver Analysis & Implications

HPQ’s strong Q3 results appear to be driven by cost discipline and stable demand across core hardware segments. The company maintained a low total operating expense of ~15.5% of revenue, which supports its profitability. However, the high fixed costs associated with R&D and SG&A suggest that any near-term disruptions in demand could pressure margins.

From a macro perspective, the tech hardware sector remains sensitive to global supply chain fluctuations and demand cycles. HP’s geographic diversification and robust ecosystem of partners help buffer against these risks, but the company must continue to innovate to maintain its position in a competitive landscape.

Investment Strategies & Recommendations

For short-term investors, the backtest results suggest caution if HPQ were to miss expectations in future quarters. The historical volatility and underperformance following a miss indicate that a defensive or hedged approach may be prudent.

Long-term investors, on the other hand, may focus on the company’s strategic direction and capacity to sustain profitability despite industry headwinds. HP’s solid Q3 performance and consistent cash flow generation offer a compelling backdrop for those with a longer time horizon.

It is also important to monitor guidance and management commentary in upcoming reports, as these can provide further insight into the trajectory of demand and cost structures.

Conclusion & Outlook

HPQ’s Q3 earnings beat expectations, showcasing strong execution in a challenging market. However, the historical performance of the stock following earnings misses remains a cautionary signal for investors. While the broader sector does not show a significant reaction to similar events, HP’s individual performance appears to carry more weight in market sentiment.

Looking ahead, the next key catalyst for HPQ will be its guidance for the upcoming quarter and how the company positions itself in response to macroeconomic conditions. Investors should remain attentive to these developments and adjust their strategies accordingly.