Summary of HP Inc. (HPQ) Conference Call Company Overview - **Company**: HP Inc. (HPQ) - **Industry**: Personal Computers and Printing Key Financial Metrics - **F2Q25 EPS**: $0.71, missing Goldman Sachs (GS) estimate of $0.82 and consensus of $0.80 [2][3] - **Revenue**: $13.2 billion, in line with GS estimate of $13.2 billion but slightly below consensus of $13.1 billion [2][5] - **EBIT**: $961 million with a margin of 7.3%, missing GS estimate of $1.1 billion and consensus of $1.1 billion [2][9] - **Personal Systems Group Revenue**: $9.024 billion, above GS estimate of $9.019 billion [5] - **Printing Revenue**: $4.181 billion, below GS estimate of $4.221 billion [5] Guidance and Outlook - **F3Q25 EPS Guidance**: $0.68-$0.80, below consensus of $0.90 [6] - **F2025 EPS Guidance**: Lowered to $3.00-$3.30 from $3.45-$3.75, reflecting moderated demand and tariff impacts [2][7] - **Free Cash Flow Guidance**: Lowered to $2.6-$3.0 billion from $3.2-$3.6 billion [2][7] - **PC Industry Outlook**: Now expects low single-digit percentage (LSD%) unit growth year-over-year, down from mid-single-digit percentage (MSD%) [1][7] Performance Analysis - **PC Margins**: Weakness attributed to supply chain resiliency initiatives and competitive dynamics [1] - **Printing Margins**: Improved to 19.5%, above GS estimate of 19.0% [2][9] - **Cost of Revenue**: Increased to $10.481 billion, reflecting a 7% year-over-year increase [10] Risks and Challenges - **Demand Risks**: Slower-than-expected consumer demand and potential increases in hybrid work could negatively impact commercial PC demand [12] - **Pricing Pressure**: High levels of industry channel inventory and declining component costs may lead to lower margins [12] - **Market Competition**: Increased competition in both commercial and consumer printing markets [13] Strategic Initiatives - **Focus on Higher-Margin Products**: HPQ is shifting towards higher-margin hardware and ink subscription services to mitigate headwinds in the printing segment [13] - **Capital Allocation Policy**: HPQ aims to return 100% of free cash flow to shareholders through dividends and buybacks [14] Investment Thesis - **Neutral Rating**: Goldman Sachs maintains a neutral rating on HPQ with a 12-month price target of $27, indicating a downside potential of 4.7% from the current price of $28.34 [11][15] Conclusion HPQ's recent performance reflects challenges in the PC market due to macroeconomic factors and competitive pressures, leading to lowered guidance and expectations. The company's strategic focus on higher-margin products and commitment to returning capital to shareholders may provide some support in navigating these challenges.

Financial Data and Key Metrics Changes - The company reported a 5% increase in revenue in constant currency year over year, marking the fourth consecutive quarter of revenue growth [8][22] - Non-GAAP operating profit fell short of expectations due to additional tariff costs, impacting earnings per share by approximately $0.12 [9][22] - Gross margin decreased to 20.7% year over year, influenced by increased tariff and commodity costs [24] Business Line Data and Key Metrics Changes - Personal Systems revenue grew 8% in constant currency, driven by strong commercial performance, with commercial revenue increasing by 9% year over year [10][26] - Print revenue declined 3% in constant currency, with growth in Europe offsetting a slowdown in North America and weak demand in China [12][28] - The operating margin for Personal Systems was 4.5%, below the guidance range, primarily due to higher tariff costs [27] Market Data and Key Metrics Changes - Revenue growth was observed across all regions, with APJ growing 9%, Americas growing 5%, and EMEA growing 1% in constant currency [23] - The company expects the PC market to grow low single digits for the second half of the year, influenced by macroeconomic uncertainties [19][33] - The print market is anticipated to decline in low single digits for the calendar year, with expectations of a mid-single-digit decline in the second half [34] Company Strategy and Development Direction - The company is focusing on diversifying its manufacturing locations to mitigate geopolitical risks, with plans for nearly all products sold in North America to be built outside of China by June [9][10] - The Future Ready Accelerated Plan aims to deliver at least $2 billion in gross annual run rate structural savings by the end of fiscal year 2025 [19][30] - The company is committed to leveraging AI to enhance productivity and employee satisfaction, with a significant focus on AI PCs and related innovations [14][21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic external environment, including shifting trade policies and tariffs, which impacted operating profit [7][22] - The company remains confident in its ability to navigate market uncertainties and expects to fully mitigate tariff costs by Q4 [18][33] - Future growth is expected to be driven by strong demand in commercial PCs and the adoption of AI technologies [19][66] Other Important Information - The company returned approximately $400 million to shareholders through dividends and share repurchases [31] - Free cash flow was slightly negative due to timing of payments related to inventory actions taken for tariff mitigation [30][68] Q&A Session Summary Question: Expectations for the PC market in the second half of the year - Management noted strong demand in Q2, especially in commercial, but adopted a more prudent outlook for the second half due to economic conditions and price increases [42][43] Question: Size and growth of growth businesses - Growth businesses are performing well and are expected to represent more than 25% of the PC business by year-end, with solid growth in AIPCs and Workforce Solutions [49][50] Question: Personal Systems margins for the full year - Margins are expected to be in the 5% to 7% range for the full year, likely in the lower half due to Q2 impacts [55][56] Question: AI PCs and their impact on growth - The company is optimistic about AI PCs, which are expected to represent a significant portion of PC shipments in the coming years, driving higher average selling prices [66] Question: Mitigation actions for tariff impacts - The company has accelerated the shift of manufacturing out of China and implemented price increases across its portfolio to offset tariff costs [75][78]

Core Viewpoint - The market anticipates HP (HPQ) will report a year-over-year decline in earnings despite an increase in revenues for the quarter ending April 2025, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - HP is expected to post quarterly earnings of $0.80 per share, reflecting a year-over-year decrease of 2.4%, while revenues are projected to reach $13.36 billion, an increase of 4.3% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating that analysts have not significantly altered their initial projections during this period [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model compares the Most Accurate Estimate to the Zacks Consensus Estimate, suggesting that recent analyst revisions may provide more accurate insights into expected earnings [5][6]. Earnings ESP Analysis - HP's Most Accurate Estimate is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.25%, indicating a bearish outlook from analysts [10]. Additionally, HP currently holds a Zacks Rank of 4, complicating predictions of an earnings beat [11]. Historical Performance - In the last reported quarter, HP was expected to earn $0.75 per share but delivered $0.74, resulting in a surprise of -1.33%. Over the past four quarters, HP has only beaten consensus EPS estimates once [12][13]. Conclusion - While HP does not appear to be a strong candidate for an earnings beat, investors should consider other factors influencing stock performance ahead of the earnings release [16].