Information technology company HP Inc. (NYSE: HPQ) beat first-quarter FY25 revenue estimates on Thursday (Friday AEDT) on the back of underlying strength in its personal systems segment and growing demand for artificial intelligence-capable systems.
However, revelations that the computer and printer giant would fail to beat analysts' consensus estimate of 86 cents - with projected second-quarter adjusted profit per share between 75 cents and 85 cents - saw the company’s share price dip over 3% in Thursday's trading.
Overall, the company's revenue grew 2.4% year-on-year to $13.5 billion, while adjusted earnings per share (EPS) dropped to 74 cents from 81 cents a year ago.
HP told the market that the outlook reflected its anticipation of higher costs tied to U.S. tariff increases on China and "associated mitigations."
The company highlighted efforts to diversify its supply chain and expects over 90% of products sold in the U.S. will be made outside of China by the end of 2025.
The company also reminded the market of restructuring plans to generate savings of around $0.3 billion in FY25 by laying off an additional 1,000 to 2,000 employees.
First quarter highlights include:
- Personal Systems net revenue was $9.2 billion, up 5% year over year.
- Printing net revenue was $4.3 billion, down 2% year over year.
- $70 million of free cash flow.
- Dividend payment of $0.2894 per share.
- Consumer PS net revenue was down 7%.
- Commercial PS net revenue was up 10%.
- Total units were down 1% with Consumer PS units down 11%.
- Commercial PS units were up 6%.
- Consumer Printing's net revenue was up 5%.
- Commercial Printing net revenue was down 7%.
- Supplies net revenue was down 1% (flat in constant currency).
- Total hardware units were up 5%.
- Consumer Printing units were up 7% and Commercial Printing units were flat.
Outlook
For FY25, HP estimates GAAP diluted net EPS to be in the range of $2.86 to $3.16 and non-GAAP diluted net EPS to be in the range of $3.45 to $3.75 and expects to generate free cash flow in the range of $3.2 to $3.6 billion.
Meanwhile, HP has wasted no time preparing for the impact of President Trump's tariffs on its business this year.
The computer company told investors that its full-year profit outlook now reflects the added cost of U.S. tariff increases on China.
By the end of FY25, the company expects 90% of its products sold in North America will be built outside China.
However, due to new found cost savings to offset higher expenses, the company has refrained from slashing its guidance.
While HP has stated that price increases on products are a last resort, HP CEO Enrique Lores suggested that some targeted increases are expected.
President Trump announced plans on Wednesday to implement an additional 10% tariff on Chinese goods starting 4 March, doubling the existing 10% across-the-board tariff that came into effect on 10 February.
These tariffs will be added to the 10% to 25% duties that Trump imposed on more than $300 billion of products from China in his first term as president, which mostly remain intact.
