Q1 2025 Financial Performance - Revenue decreased to $1.457 billion, a 3.0% decrease year-over-year at actual currency (AC) and a 1.1% decrease at constant currency (CC)[6, 25] - Adjusted operating margin was 1.5% in Q1 2024 and increased to 2.2% in Q1 2025[7] - Free cash flow was negative $109 million in Q1 2025, compared to negative $89 million in Q1 2024[8] - Adjusted loss per share was negative $0.06 in Q1 2024 and turned into positive $0.06 in Q1 2025[10] Segment Results - Print & Other segment revenue decreased by 9.4% year-over-year (AC) to $1.294 billion[25, 27] - IT Solutions segment revenue increased by 121.6% year-over-year (AC) to $164 million[25, 31] Strategic Initiatives and Outlook - The company is executing a Reinvention program, targeting over $700 million in identified savings[14, 18] - The company expects over $250 million of cost synergies from the ITsavvy and Lexmark acquisitions[18] - Full-year 2025 guidance includes low single-digit revenue growth in constant currency, an adjusted operating margin of at least 5.0%, and free cash flow of $350 million to $400 million[50] Lexmark Acquisition - The acquisition of Lexmark is progressing as expected, with revenue growing approximately 9% in 2024 to $2.247 billion and EBITDA increasing 24% to $291 million[21, 22] - The company continues to expect >$1 per share of adjusted EPS accretion from the Lexmark acquisition[21] Tariff Impact - The company estimates a potential $50 million reduction in operating income in 2025 due to incremental tariff costs, based on tariffs in place on May 1[24]

Core Viewpoint - The printing industry is undergoing significant transformation driven by the demand for efficient office solutions and cost control, with black-and-white laser duplex printers gaining popularity among enterprises [1][4]. Group 1: Product Launch and Features - HP launched nine new models of the Jet series duplex laser printers aimed at helping enterprises reduce operational costs and improve efficiency, with models available from March and June 2025 [1][7]. - The new printers support a paper weight range of 60-220g/m2 and are compatible with various media types, including thick paper, thin paper, labels, card stock, and cotton paper [7]. Group 2: Market Strategy and Customer Focus - HP emphasizes a customer-centric approach in China, aiming to respond to market demands and maintain competitiveness despite external changes [3][4]. - The company is committed to increasing investment in product design and R&D to enhance localization and manufacturing capabilities in China [4]. Group 3: Technology and Innovation - HP recognizes the importance of both inkjet and laser printing technologies, aiming to combine their advantages to meet diverse customer needs [4]. - The company plans to explore the integration of artificial intelligence to optimize document processing and enhance the intelligence of printing devices [5]. Group 4: Customer Feedback and Service Models - HP has developed three leasing models to cater to different customer needs, including direct leasing and partnerships with other providers [5]. - A comprehensive feedback system is in place to gather customer insights across various dimensions, ensuring that product and service strategies align with market demands [5].

Core Viewpoint - HP Inc. reported lower-than-expected earnings for Q1 fiscal 2025, leading to a 3.9% decline in shares during extended trading, and provided a profit outlook for Q2 that also fell short of expectations [1][2]. Financial Performance - HP's Q1 non-GAAP earnings were 74 cents per share, missing the consensus estimate by one cent, and down 9% from 81 cents in the same quarter last year due to higher expenses [2][3]. - Revenues increased by 2.4% year-over-year to $13.5 billion, aligning with the Zacks Consensus Estimate, driven by higher Personal Systems sales, which offset declines in the Printing business [3][4]. Segment Performance - Personal Systems (PS) revenues, accounting for 68.1% of total revenues, reached $9.2 billion, a 5% increase year-over-year (5% at constant currency) due to strong commercial unit performance and market share gains [4][5]. - Total PC units sold decreased by 1% year-over-year, with a significant 11% drop in Consumer PS shipments, partially offset by a 6% increase in Commercial PS shipments [5]. - Printing business revenues, making up 31.9% of total revenues, fell by 2% year-over-year to $4.45 billion, impacted by weaknesses in Commercial Printing and Supplies [6]. Regional Performance - Growth was observed across all regions, with the Americas up 3%, EMEA growing 2%, and Asia Pacific and Japan increasing by 5% year-over-year [7]. Operating Margins - The non-GAAP operating margin for PS contracted by 60 basis points to 5.5%, while the Printing division's margin decreased by 90 basis points to 19%. Overall, HP's non-GAAP operating margin from continuing operations fell by 80 basis points to 9.6% due to higher commodity costs and increased strategic investments [8]. Balance Sheet and Cash Flow - At the end of Q1, HP had cash and cash equivalents of $2.89 billion, down from $3.25 billion in the previous quarter. The company generated $374 million in cash from operations and $70 million in free cash flow, returning $373 million to shareholders through share repurchases and dividends [9]. Guidance - For Q2 fiscal 2025, HP estimates non-GAAP EPS between 75 cents and 85 cents, with a midpoint of 80 cents, below the Zacks Consensus Estimate of 85 cents. The company raised its fiscal 2025 EPS guidance to a range of $3.45 to $3.75, up from $3.06-$3.36, with a consensus estimate of $3.57 [11].

Financial Data and Key Metrics Changes - HP Inc. reported a revenue growth of 2% year-over-year for Q1 2025, marking the third consecutive quarter of revenue growth [11][38] - Non-GAAP earnings per share (EPS) was $0.74, slightly above the midpoint of guidance, with operating profit margins for both Print and Personal Systems in line with expectations [12][42] - Gross margin decreased to 21% year-over-year due to increased commodity costs, with expectations for stronger margins in the second half of the year [40][41] Business Line Data and Key Metrics Changes - Personal Systems revenue increased by 5% year-over-year, driven by growth in the commercial segment, which represented over 70% of the PS revenue mix [24][43] - Print revenue declined by 1% in constant currency year-over-year, with strong unit growth in home and consumer subscriptions, achieving a milestone of one million instant paper subscribers [29][46] - Workforce solutions continued to show momentum with year-over-year revenue growth, including new managed print wins [30] Market Data and Key Metrics Changes - Revenue growth was observed across all regions, with APJ growing by 5%, Americas by 3%, and EMEA by 2% in constant currency [40] - The AI PC market experienced a sequential growth rate of 25% in the last calendar quarter, contributing to HP's commercial growth [26] Company Strategy and Development Direction - HP is focusing on leading the future of work by investing in AI and software capabilities, including the acquisition of strategic assets from Humane to enhance its technology ecosystem [14][15] - The company is realigning its key growth areas to prioritize hybrid systems, advanced compute solutions, and AI PCs, while managing gaming as part of its core portfolio [16] - HP aims to deliver $1.9 billion in gross annual run rate structural savings by the end of fiscal year 2025 to mitigate macro and geopolitical uncertainties [35][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year outlook, anticipating stronger EPS in the second half of the year driven by seasonal strength in personal systems and the Windows 11 refresh [56][62] - The company is proactively managing geopolitical developments and has built a globally diverse supply chain to ensure manufacturing resiliency [32][34] - Management noted that the current tariff environment has been accounted for in their guidance, with plans to leverage their global supply chain to mitigate impacts [66][68] Other Important Information - HP's cash flow from operations was approximately $375 million, with free cash flow at $70 million, reflecting normal seasonality [51] - The company returned close to $400 million to shareholders through share repurchases and dividends [53] Q&A Session Summary Question: Impact of China tariff on guidance - Management included known impacts of current tariffs in their guidance, primarily affecting the personal systems business, with less than 10% of revenue expected to come from China by the end of FY 2025 [66][67] Question: Drivers of personal systems growth - Key drivers include aging install base, Windows 11 refresh, and penetration of AI PCs, with a focus on profitable premium categories [74][75] Question: Windows end of life and device specifications - Businesses are becoming more competent in refreshing devices, with an acceleration in the Windows 11 refresh observed [78] Question: Customer adoption of AI PCs - Current expectations for AI PC penetration by year-end are around 25%, with projections for 40% to 50% in two years [81] Question: Competitive environment for print in China - The competitive environment remains stable, with HP growing share in the print space, particularly in consumer hardware [121] Question: Inventory growth implications - Increased inventory was a strategic response to tariffs, impacting cash conversion cycles but not the full-year outlook [126][127]