Analyst(s): Olivier Blanchard
Publication Date: December 3, 2024
Despite facing market challenges, HP Inc.’s Q4 FY24 results reflect modest revenue growth, solid cash flow generation, and strong shareholder returns. Personal Systems and Printing segments led performance improvements, while free cash flow management supported increased dividends and share repurchases. HP’s focus on high-growth areas and strategic investments positions it for long-term success in FY25.
What is Covered in this Article:
- Detailed analysis of HP’s revenue trends and segment performance.
- Insights into GAAP and non-GAAP EPS metrics.
- Review of cash flow management and shareholder returns.
- Strategic focus on high-growth areas and FY25 outlook.
- Challenges and opportunities shaping HP’s fiscal future.
The News: HP Inc. reported Q4 FY24 revenue of $14.1 billion, reflecting a 1.7% year-over-year increase. This growth was driven by a 2% rise in the Personal Systems segment and a 1% increase in Printing. Within Personal Systems, Consumer revenue declined by 4%, while Commercial revenue grew by 5%. In Printing, Consumer revenue increased by 3%, and Supplies rose by 2%, partially offsetting a 1% decline in Commercial Printing. This marks the second consecutive quarter of revenue growth for HP.
For the fiscal year, HP’s total revenue slightly declined by 0.3% to $53.6 billion. GAAP diluted net EPS was $2.81, which exceeded prior guidance but represented a 14% year-over-year decline due to restructuring and acquisition costs. Non-GAAP diluted EPS increased by 3% to $3.38, indicating operational efficiencies. HP generated $3.3 billion in free cash flow and returned $3.2 billion to shareholders through dividends and share repurchases, including a 5% dividend increase.
Looking ahead, HP forecasts FY25 GAAP EPS to be between $3.06 and $3.36, with non-GAAP EPS expected to range from $3.45 to $3.75. The company focuses on high-growth verticals such as hybrid work solutions and gaming while addressing macroeconomic challenges. HP’s financial management and strategic investments in innovation contribute to a cautiously optimistic outlook for the upcoming year.
HP Inc.’s Q4 FY24 Earnings: A Resilient Finish to a Challenging Year
Analyst Take: HP Inc. reported Q4 FY24 revenue of $14.1 billion, reflecting a 1.7% year-over-year increase. This growth was driven by a 2% rise in the Personal Systems segment and a 1% increase in Printing. Within Personal Systems, Consumer revenue declined by 4%, while Commercial revenue grew by 5%. In Printing, Consumer revenue increased by 3%, and Supplies rose by 2%, partially offsetting a 1% decline in Commercial Printing. This marks the second consecutive quarter of revenue growth for HP.
For the fiscal year, HP’s total revenue slightly declined by 0.3% to $53.6 billion. GAAP diluted net EPS was $2.81, which exceeded prior guidance but represented a 14% year-over-year decline due to restructuring and acquisition costs. Non-GAAP diluted EPS increased by 3% to $3.38, indicating operational efficiencies. HP generated $3.3 billion in free cash flow and returned $3.2 billion to shareholders through dividends and share repurchases, including a 5% dividend increase.
Looking ahead, HP forecasts FY25 GAAP EPS to be between $3.06 and $3.36, with non-GAAP EPS expected to range from $3.45 to $3.75. The company focuses on high-growth verticals such as hybrid work solutions and gaming while addressing macroeconomic challenges.
Revenue Trends: Growth Amid Market Challenges
HP Inc. reported a 1.7% increase in revenue for Q4 FY24, totaling $14.1 billion, marking growth for the second consecutive quarter. While this quarter showed a positive trend, the overall revenue for the fiscal year decreased by 0.3%, which reflects ongoing macroeconomic challenges and competitive pressures.
HP’s revenue sources indicate that the Personal Systems segment was a key driver of stability, benefiting from a 5% growth in Commercial revenues. In contrast, the Consumer segment experienced a 4% revenue decline, attributed to changes in consumer spending behavior.
There were slight revenue gains in the Printing segment, with Consumer Printing rising by 3%, offsetting a minor decline in Commercial Printing revenue. The Q4 growth suggests potential resilience; however, the overall annual performance indicates a need for focus on high-growth sectors.
Personal Systems: A Strategic Driver
The Personal Systems division of HP generated $9.6 billion in revenue during Q4 FY24, reflecting a 2% increase compared to the previous year. Commercial Personal Systems contributed to growth with a 5% revenue rise, indicating HP’s capability to meet enterprise demands, especially in hybrid work and remote collaboration technologies. The end of support for Windows 10 next year, as well as the introduction of powerful new Copilot+ and Copilot+ ready AI PCs is expected to fuel this trend in the commercial segment well into 2025.
In contrast, Consumer Personal Systems saw a 4% decline in revenue, which points to fluctuating consumer demand amidst economic uncertainty. Part of the softness in the consumer segment can reasonably be attributed to the majority of Copilot+ and Copilot+ ready systems entering the market being priced above $1,000, effectively keeping many consumers looking for budget-priced AI-capable systems out of the Copilot+ ecosystem – for now. We expect this pricing pressure to resolve in 2025, as systems powered by Qualcomm’s Snapdragon X Plus processors find their way to consumers, and incoming AMD Ryzen AI processors targeting lower price points enter the market at the start of H2 2025. To wit, total unit shipments increased by 1%, suggesting some resilience against market fluctuations, and traction for more affordably priced Copilot+ PCs powered by Snapdragon X Plus 10-core and 8-core processors.
From an operational perspective, the Personal Systems division reported an operating margin of 5.7%, a decrease from 6.7% in Q4 FY23.
Printing: Solidifying Market Presence
HP’s Printing division generated $4.5 billion in Q4 FY24, marking a 1% year-over-year revenue increase. Consumer Printing outperformed expectations, with a 3% revenue rise, driven by a 10% increase in hardware unit shipments. Conversely, Commercial Printing revenue fell by 1%, reflecting challenges in the enterprise sector.
Supplies revenue, a critical component of the Printing segment, grew by 2%, benefiting from improved distribution channels and customer engagement strategies. The segment’s operating margin expanded to 19.6%, up from 18.9% in Q4 FY23, showcasing HP’s ability to maintain profitability despite market fluctuations.
This is a welcome development as the trend had previously followed a downward trajectory for the segment. The introduction of useful next generation generative AI features in HP’s print products could also help reenergize the category in 2025.
Strategic Investments in Growth Areas
As a central part of HP’s strategy, the company concentrates on high-growth verticals such as hybrid work solutions, gaming, and industrial graphics. These areas are expected to experience accelerated growth, providing margin expansion and market differentiation opportunities. The company invests in these segments to better align with evolving customer demands.
Hybrid work solutions, which include video conferencing and digital collaboration tools, are relevant to workplace dynamics. HP’s acquisition of Poly in 2022 is a great example of this expansive vision: HP’s integration of professional audio, video, and teleconference solutions into its workspace ecosystem provides the company with both a unique positioning story and a strong potential for attach rates (for traditional office environments as well as hybrid work). The gaming segment, which also encompasses PCs and accessories, targets the expanding gaming industry, where HP can leverage its comprehensive portfolio of better-together solutions into a competitive advantage.
Industrial graphics and 3D printing are also recognized for their growth potential, especially in manufacturing and packaging, and we expect to see a resurgence of interest both in the IIOT segment and 3D printing in 2025.
HP’s Guidance for FY2025
HP’s guidance for FY25 indicates cautious optimism. GAAP diluted net EPS is expected to range between $3.06 and $3.36. Non-GAAP EPS is projected at $3.45 to $3.75, reflecting anticipated improvements in operational efficiency and market conditions. The company also expects free cash flow of $3.2 billion to $3.6 billion, underscoring its ability to generate capital for reinvestment and shareholder returns.
CEO Enrique Lores emphasized the company’s readiness to lead in hybrid work, digital transformation, and sustainability. These strategic priorities are expected to drive innovation and enhance HP’s competitive positioning.
Looking Forward
HP Inc.’s fiscal 2024 performance underscores the complexities of operating in a dynamic and competitive environment. The company’s ability to deliver growth in key segments, robust cash flow management, and shareholder returns highlights its resilience and strategic foresight.
HP’s focus on innovation, sustainability, and high-growth verticals will drive value creation. By leveraging its strengths and addressing market challenges, the company can achieve sustainable growth and solidify its market leadership in fiscal 2025 and beyond.
See the complete HP Inc. Q4 FY2024 earnings report on the HP Inc. 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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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.
