Analyst(s): Olivier Blanchard
Publication Date: March 5, 2025
HP’s Q1 FY 2025 earnings highlight steady revenue growth fueled by Commercial PC strength and AI PC momentum, but profitability faced headwinds from tariff costs and weak Consumer PC demand. The company continues to invest in AI innovation while executing cost-saving measures to mitigate margin pressures.
What is Covered in this Article:
- HP’s Q1 FY 2025 financial results and revenue performance
- AI PC adoption and commercial PC growth trends
- Printing segment struggles and consumer market softness
- Challenges from rising costs, tariffs, and supply chain shifts
- HP’s cost-saving initiatives and financial outlook for FY 2025
The News: HP Inc. (NYSE: HPQ) reported its Q1 FY 2025 financial results, with revenue of $13.5 billion (+1% above consensus), reflecting a 2% year-on-year (YoY) increase. HP’s Personal Systems segment revenue rose 5% YoY to $9.2 billion, with Commercial PC revenue up 10% YoY, offsetting a 7% YoY decline in Consumer PCs. Printing revenue declined 2% YoY to $4.3 billion, driven by a 7% YoY drop in Commercial Printing revenue, partially offset by 5% YoY growth in Consumer Printing. Meanwhile, Supplies revenue decreased slightly by 1% YoY.
Non-GAAP operating income stood at $984 million (-11% YoY; -0.6% below consensus), with a non-GAAP operating margin of 7.3%, down from 8.4% in Q1 FY 2024. Non-GAAP net earnings were $740 million (-1.5% below consensus), marking a 13% YoY decline, while non-GAAP diluted earnings per share (EPS) fell 9% YoY to $0.74, which was below street expectations by 0.5%.
“We are pleased with our Q1 performance, achieving revenue growth for the third straight quarter and advancing our strategy to lead the future of work,” said Enrique Lores, President and CEO of HP Inc. “Our progress was fueled by a strong commercial business in Personal Systems and momentum in our key growth areas, including AI PCs. We are focused on taking decisive action to address evolving market conditions in the near term while investing in our long-term growth.”
HP Q1 FY 2025: Commercial PCs Fuel Growth, While Printing Struggles Against Market Pressures
Analyst Take: HP posted its third consecutive quarter of revenue growth in Q1 FY 2025, driven by strong demand for Commercial PCs and accelerating AI PC adoption. Profitability remains a challenge, however, as rising component costs, tariff pressures, and restructuring expenses continue to weigh on margins. In response, the company has raised its cost savings target to $1.9 billion to counterbalance these financial headwinds. While HP remains focused on AI-driven innovation, commercial computing expansion, and supply chain diversification, near-term hurdles highlight the complexity of the current market landscape for the company and more broadly, the device OEM segment as a whole.
Personal Systems: AI PC Adoption and Commercial Growth Drive Momentum
HP’s Personal Systems revenue grew 5% YoY to $9.2 billion. This was largely fueled by a 10% surge in Commercial PC sales as the next PC refresh cycle began to pick up speed. This momentum helped offset ongoing softness in Consumer PCs, particularly in China.
We note that AI PC adoption is accelerating faster than expected, with HP now forecasting that AI PCs will represent 25% of total shipments by the end of FY 2025 – up from a previous estimate of 20%. This percentage could climb to 40%-60% within two years. Enterprise refresh cycles and Windows 11 upgrades are expected to be key drivers for the rest of the year, especially with Windows 10 support ending in October 2025.
On the consumer side, revenue declined 7% YoY, with unit shipments dropping 11%, as buyers deferred upgrades and HP pivoted toward higher-margin premium models. It bears mentioning that the AI PC segment, and particularly the Copilot+ class PC category, remains mostly focused on premium-tier devices for the time being. The reason behind the delay in rolling out more budget and volume-friendly Copilot+ PCs is fairly straightforward: incumbent AI PC processor vendors AMD and Intel have yet to release AI PC processors for high-volume price tiers. AMD’s part is expected to hit the market in the May-June timeframe, with Intel following in early 2026. Only Qualcomm’s Snapdragon X PC processor series has, thus far, released a Copilot+ class AI PC processor for high volume tiers. And while Snapdragon X PCs are gaining momentum with consumers, the Arm-based platform is a new entrant in a relatively mature market that has, for decades, favored x86 processors from known quantities AMD and Intel.
This is to say that the absence of a strong volume sales play on HP’s AI PC report card isn’t unique to HP. The problem is industry-wide. We anticipate gradual improvement starting in late Q2 or early Q3 2025, as the overdue availability of more budget-friendly Copilot+ class processors begins to enable HP and other PC OEMs to bring lower-priced Copilot+ PCs to market.
Segment operating margin fell 0.6 points YoY to 5.5%, with rising commodity costs offsetting pricing actions and efficiency measures. AI investments and tariff-related expenses appear to be further straining margins, making cost control and strategic execution critical to sustaining profitability.
Printing: Structural Headwinds Offset Consumer Growth
Printing revenue dipped 2% YoY to $4.3 billion, with a 7% decline in Commercial Printing outweighing a modest but notable 5% gain in Consumer Printing.
Commercial demand was particularly weak in China, where Japanese competitors benefiting from a weaker yen were able to deliver more aggressive pricing. Supplies revenue also fell 1% YoY due to currency headwinds and lower consumables usage.
On a positive note, Consumer Printing saw unit shipments rise 7%, with Big Tank printers driving demand. HP also expanded its subscription-based printing model, integrating Smart Tank printers into its HP All-in plans, pushing Instant Ink subscribers past 1 million and strengthening its recurring revenue stream.
The company also reinforced its industrial printing business with new PageWide digital presses and secured large-scale managed print service contracts, such as Prime Healthcare’s 44 hospitals and 45,000 employees.
One aspect of HP’s print business we feel is worth keeping an eye on is the incorporation of agentic and generative AI features coming to HP’s print solutions later this year. These new features have the potential to bring much-needed new utility and UX improvements to HP’s print business, which could help drive more demand momentum into H2 2025.
Efficiency Improvements and Tariff Headwinds Challenge Profitability
To combat rising costs, HP has increased its Future Ready cost savings target from $1.6 billion to $1.9 billion by the end of FY 2025. This effort includes 1,000 – 2,000 job cuts, expected to yield $300 million in annual savings. Supply chain restructuring is also a priority, with HP aiming to reduce North American reliance on China to below 10% by FY 2025-end to mitigate geopolitical risks.
However, these measures come at a cost. Tariffs and higher component expenses contributed to a 9% YoY decline in non-GAAP diluted EPS to $0.74. Both PC and Printing segments remain vulnerable to pricing fluctuations, geopolitical instability, and currency shifts, presenting ongoing challenges to profitability.
Guidance and Final Thoughts: Navigating Market Uncertainties
HP reaffirmed its full-year non-GAAP EPS guidance of $3.45–$3.75, with GAAP EPS expected between $2.86 and $3.16. For Q2 FY 2025, the company projects GAAP EPS of $0.62–$0.72 and non-GAAP EPS of $0.75–$0.85, alongside full-year free cash flow expectations of $3.2 billion to $3.6 billion.
While tariffs and component costs present near-term hurdles, HP remains optimistic about margin improvements in the latter half of FY 2025, fueled by seasonal PC demand, AI adoption, and continued cost-cutting initiatives. Supply chain diversification – reducing China’s reliance to under 10% for North America – is a strategic move to hedge against geopolitical risks. However, sustaining revenue growth while managing cost pressures will require careful execution. With restructuring costs and market volatility still in play, HP’s ability to navigate these challenges will be key to meeting its full-year targets and maintaining investor confidence.
Read the full HP Q1 FY 2025 financial results press release on the HP website.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses HP’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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HP Sets New Standard for Personalized Printing with HP Print AI – Six Five On The Road
Author Information
Olivier Blanchard is Research Director, Intelligent Devices. He covers edge semiconductors and intelligent AI-capable devices for Futurum. In addition to having co-authored several books about digital transformation and AI with Futurum Group CEO Daniel Newman, Blanchard brings considerable experience demystifying new and emerging technologies, advising clients on how best to future-proof their organizations, and helping maximize the positive impacts of technology disruption while mitigating their potentially negative effects. Follow his extended analysis on X and LinkedIn.
