HP Inc’s Earnings Call: Growth Amid Tariff Challenges

HP Inc ((HPQ)) has held its Q2 earnings call. Read on for the main highlights of the call.

HP Inc’s recent earnings call presented a balanced outlook, highlighting significant achievements in revenue growth and innovation, while also acknowledging challenges posed by tariff impacts and moderated future guidance. The company is actively addressing these hurdles through cost-saving measures and strategic adjustments.

Solid Revenue Growth

HP Inc. reported a robust revenue growth for the fourth consecutive quarter, achieving a 5% increase in constant currency year-over-year. This growth was primarily driven by strong performance in personal systems, especially within the commercial and high-value categories.

Manufacturing Diversification

In response to tariff challenges, HP has strategically expanded its manufacturing operations to countries like Vietnam, Thailand, India, Mexico, and the US. By the end of June, the company expects nearly all products sold in North America to be manufactured outside of China, thereby mitigating tariff impacts.

AI and Innovation Advancements

HP has made significant strides in AI and innovation, unveiling a comprehensive AI PC portfolio and introducing redesigned HP EliteBook and EliteDesk models. The launch of the HP ZGX AI station in collaboration with NVIDIA, along with new LaserJet Enterprise devices designed to counter quantum computer attacks, underscores HP’s commitment to technological advancement.

Future-Ready Savings Plan

HP is on track to deliver at least $2 billion in gross annual run-rate structural savings by the end of fiscal year 2025, surpassing their previous targets. This initiative is a key component of HP’s strategy to enhance operational efficiency and financial performance.

Tariff Impact on Operating Profit

The company faced a net impact of approximately 100 basis points on non-GAAP operating profit due to additional tariff costs, translating to a $0.12 impact on non-GAAP earnings per share. This highlights the ongoing financial challenges posed by global trade dynamics.

Print Revenue Decline

HP experienced a 3% decline in print revenue in constant currency, with notable softness in North America and continued weak demand in China. This segment remains an area of concern for the company.

Lowered Guidance and Market Uncertainty

Due to macroeconomic uncertainties, HP has moderated its guidance for the second half of the year. The company anticipates low single-digit growth in the PC market for the year, while the print market is expected to decline.

Free Cash Flow Challenges

HP’s free cash flow was slightly negative, impacted by the timing of payments related to inventory adjustments as part of tariff mitigation efforts. This has affected the company’s cash conversion cycle.

Forward-Looking Guidance

Looking ahead, HP Inc. shared several key metrics and guidance figures. The company expects a return to its long-term operating margin range of 5% to 7% for personal systems next quarter, with print operating margins projected to remain within the 16% to 19% range. For Q3, HP forecasts non-GAAP diluted EPS to be between $0.68 and $0.80, and for fiscal 2025, a range of $3.00 to $3.30. HP remains focused on supply chain diversification, AI-driven innovations, and strategic cost management to navigate the evolving market landscape.

In conclusion, HP Inc.’s earnings call reflects a balanced sentiment, acknowledging both achievements and challenges. The company’s proactive measures in manufacturing diversification, innovation, and cost savings are pivotal as it navigates the complexities of the current economic environment. Investors and stakeholders will be keenly watching HP’s strategic execution in the coming quarters.