Analyst(s): Olivier Blanchard
Publication Date: May 30, 2025
HP’s Q2 FY2025 earnings reflected solid commercial momentum for PCs and strategic agility. Revenue was ahead of prior-year results despite softer margins due to tariffs. Strength in Personal Systems and AI innovation bolstered the quarter as HP accelerated its supply chain rebalancing efforts.
What is Covered in this Article:
- HP’s Q2 FY2025 financial performance highlights (revenue, profit, growth rates)
- Commercial Personal Systems and AI-driven product momentum
- Printing segment dynamics, strategic cost management, and opportunities to kick off growth
- Impact of tariffs and supply chain diversification measures
- Guidance for Q3 and H2 FY2025
The News: HP Inc. (NYSE: HPQ) reported fiscal Q2 2025 net revenue of $13.2 billion, up 3.3% year-over-year (4.5% in constant currency), driven by strong commercial performance in the Personal Systems segment. GAAP diluted net earnings per share (EPS) came in at $0.42 for the quarter, down 31% from Q2 FY24 and below the prior outlook of $0.62–$0.72. Non-GAAP diluted net EPS came in at $0.71, down 13% year-over-year (YoY) and below the guidance of $0.75–$0.85. Higher-than-anticipated U.S. tariffs and related costs appear to be the primary cause of this YoY friction. Net cash provided by operating activities was $38 million for the quarter, while free cash flow dipped into the negative (-$95 million), reflecting inventory and tariff mitigation efforts. HP returned $400 million to shareholders through dividends and repurchases during the quarter.
Segment results included Personal Systems revenue of $9 billion (up 7% YoY, or 8% in constant currency) with a 4.5% operating margin. Printing revenue totalled at $4.2 billion (down 4% YoY) but with a predictably strong 19.5% operating margin.
Notably, the company accelerated its manufacturing footprint shift, with nearly all products sold in North America expected to be built outside China by the end of June 2025. CEO Enrique Lores commented, “While results in the quarter were impacted by a dynamic regulatory environment, we responded quickly to accelerate the expansion of our manufacturing footprint and further reduce our cost structure. These decisive actions strengthen our foundation and position us to deliver long-term sustainable growth.”
“We are executing targeted mitigation strategies,” CFO Karen Parkhill added, “and assuming current conditions remain, we expect to fully offset these costs by Q4.” For Q3 FY2025, HP projects GAAP diluted net EPS of $0.57–$0.69 and non-GAAP diluted net EPS of $0.68–$0.80; full fiscal year guidance is for GAAP diluted net EPS of $2.32–$2.62 and non-GAAP diluted net EPS of $3.00–$3.30. Free cash flow for FY25 is expected to range from $2.6–$3.0 billion.
HP Q2 FY2025 Earnings: Commercial Momentum and Supply Chain Agility Amid Trade Headwinds
Analyst Take: HP’s operational resilience and commercial momentum were clearly tested in Q2 FY2025 as the company navigated macroeconomic and geopolitical headwinds (primarily caused by the somewhat chaotic imposition of U.S. tariffs on imported materials, components, and finished goods). Despite this external friction, revenue grew 3.3% year-over-year (4.5% in constant currency), driven by strong demand for personal systems (PCs). Demand was particularly strong in commercial and AI-driven PCs, validating HP’s strategic focus on the transformative power of AI-enabled technologies on the future of work and workflow optimization enhancements.
Personal Systems: AI PCs and the Windows 11 Refresh Cycle
Personal Systems once again drove the company’s upside, with 7% revenue growth (8% in constant currency), and commercial units up 11% year-over-year. HP’s commercial business benefited from strong AIPC (AI PC) demand and the ongoing Windows 11 refresh cycle, as well as YoY share gains in premium and workstation segments. Service wins in healthcare, financial services, and retail underscore HP’s penetration into high-value verticals and the growing traction of its AI-driven workforce productivity platforms.
The launch of the HP ZGX AI Station in partnership with NVIDIA also marks a significant step in meeting data science and AI developer needs. These initiatives bolster HP’s differentiation in a market increasingly defined by device intelligence and security. HP continues to position itself well in the expanding commercial device market, where AI integration is increasingly critical.
Print: Momentum Remains Elusive
Printing revenue fell 4%, as expected, pressured by weak demand in North America and China and a declining supplies business. However, the segment produced a 19.5% operating margin—above the company’s long-term 16–19% target range—thanks to disciplined pricing, cost controls, and grant funding. HP looks to be maintaining its share of high-value office and industrial segments, and posted strong industrial hardware growth. Its investments in print platform software, workflow automation, and quantum-resistant security help fortify the segment’s margin profile and long-term relevance.
What HP seems to continue to struggle with is articulating the value proposition of Print in the age of digital. This has been a continuous battle for years now, and isn’t limited to HP. Unlike PCs, printers aren’t in the midst of a major OS refresh cycle. However, HP is focusing its efforts on several critical disruptions that could drive an industry-wide Print refresh: AI features enablement, advanced device security, sustainability improvements as an ROI driver, managed services as a TCO and risk mitigation strategy, as well as a natural PC/Printer refresh attach strategy. HP appears to be on the right track with its efforts and messaging here, but momentum has proven difficult to achieve just yet.
Tariff Impacts on HP’s Financial Performance
GAAP and non-GAAP profits trailed prior guidance, with non-GAAP operating margin declining 1.5 percentage points to 7.3% due to approximately 100 basis points of unmitigated tariff headwinds. Management acted decisively, accelerating manufacturing diversification, with production expanding rapidly in Vietnam, Thailand, India, Mexico, and the US: By the end of June, nearly all HP products sold in North America are expected to be manufactured outside of China, a strategic shift already underway but executed sooner than originally planned. This obviously speaks to HP’s impressive operational agility, although the company has yet to fully capitalize on this opportunity to showcase this as a competitive market advantage in the United States.
Despite the near-term gross margin pressure, HP’s accelerated “Future Ready” program is currently on track to exceed $2 billion in annualized savings by the end of FY25, supporting both margin recovery and ongoing investments in IP and innovation. The company’s guidance suggests caution, with management moderating its outlook because of the current state of macroeconomic uncertainty while simultaneously expressing confidence in continued sequential margin improvements, thanks to mitigation actions set to mature in H2.
Overall, HP’s Q2 FY2025 earnings help highlight the clarity behind the management team’s strategic priorities, as well as the company’s ability to both execute rapidly and pivot quickly under pressure. HP’s rapid response to shifting trade policies, for instance, combined with solid cost discipline and its increasingly AI-driven portfolio expansion, are encouraging signs that the company will continue to adjust well to disruptions and headwinds until market conditions stabilize.
What to Look For
Looking to Q3 FY2025, HP predicts more revenue growth in Personal Systems, with GAAP diluted net EPS of $0.57–$0.69 and non-GAAP EPS of $0.68–$0.80. Fiscal year guidance remains subdued relative to early-year projections, with non-GAAP EPS now expected between $3.00 and $3.30 (down from $3.45–$3.75 at the start of FY25). Note that this guidance reflects normalized PC demand and near-term costs of tariff mitigation. Free cash flow for the full year is forecast at $2.6–$3.0 billion, down from the initial $3.2–$3.6 billion outlook.
The full details are available in HP’s Q2 FY2025 earnings press release.
Disclosure: Futurum 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 Futurum as a whole.
Other insights from Futurum:
HP Inc. Q1 FY2025 Earnings: Commercial Strength and AI Initiatives Underpin Growth
PC Market Trends in 2025: AI, Hybrid Work, and Geopolitical Shifts
HP Launches More Than 80 AI-integrated Products at its Amplify Event
Author Information
Research Director Olivier Blanchard 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.
