HP Exceeds Revenue Estimates Amid PC Market Recovery but Faces Profit Challenges
HP Inc. (HPQ.N) surpassed revenue expectations for the first quarter of fiscal 2025, driven by a strengthening personal systems segment and increasing demand for AI-capable devices. However, despite the positive revenue performance, the company’s stock declined by more than 3% in extended trading following a weaker-than-expected profit outlook for the second quarter.
The technology giant reported $13.5 billion in revenue for the quarter ending January 31, exceeding Wall Street’s average estimate of $13.36 billion, according to data compiled by LSEG. This increase was fueled primarily by rising PC sales, with its Personal Systems segment—which includes desktops, laptops, and workstations—seeing a 5% growth, bringing in $9.2 billion in revenue. Within this segment, commercial PC revenue grew even more significantly, increasing by 10%.
AI-Driven Growth and PC Market Revival
A significant factor behind HP’s strong performance has been the resurgence of the PC market, which has been on an upward trend for the past five consecutive quarters. Research firm Canalys reported that total PC shipments—including desktops, notebooks, and workstations—rose 5% year-over-year in the fourth quarter, reaching 67.9 million units.
One of the key drivers of this growth is the upcoming Windows 10 end-of-support deadline in October 2025, which is expected to push millions of users to upgrade their devices. Additionally, the emergence of AI-powered PCs has sparked increased demand, with manufacturers integrating advanced AI-focused processors into their products. These developments have provided a much-needed boost to the PC industry, following a period of stagnation caused by macroeconomic uncertainties and supply chain disruptions.
HP’s Workforce Reduction and Cost-Cutting Measures
As part of its ongoing restructuring plan, HP announced plans to lay off an additional 1,000 to 2,000 employees. This move is part of a broader effort to optimize operational efficiency and reduce costs, with the company expecting to save approximately $300 million in fiscal 2025 from these layoffs. The restructuring initiative aligns with HP’s long-term strategy to streamline its workforce and enhance productivity, particularly as it adapts to shifts in the global technology landscape.
Challenges Ahead: Tariffs and Profitability Concerns
Despite HP’s strong revenue numbers, concerns surrounding profit margins have raised investor caution. The company issued a second-quarter adjusted profit forecast of $0.75 to $0.85 per share, falling short of analysts’ expectations of $0.86 per share.
Adding to the company’s challenges is the evolving trade policy landscape. On Thursday, former U.S. President Donald Trump announced plans to impose an additional 10% tariff on Chinese imports, set to take effect on March 4. This follows a previous 10% tariff increase implemented on February 4, creating uncertainty for companies reliant on China-based manufacturing and supply chains.
In response to these trade restrictions, HP has been actively working to diversify its supply chain. CEO Enrique Lores stated that by October 2025, more than 90% of HP products sold in North America will be manufactured outside of China, reducing exposure to tariff-related risks. This strategic shift aims to stabilize costs and ensure smoother operations, though the transition may come with its own set of logistical and financial challenges.
The Road Ahead for HP
While HP has demonstrated resilience by beating revenue expectations and capitalizing on a recovering PC market, the company remains cautious about profitability pressures and geopolitical risks. The impact of tariffs on Chinese imports, ongoing macroeconomic conditions, and the ability to adapt to shifting consumer preferences will play a significant role in shaping HP’s financial performance in the coming quarters.
HP continues to focus on innovation in AI-powered computing, supply chain diversification, and cost-cutting measures to strengthen its position in the industry. However, as global economic conditions evolve, the company must navigate potential headwinds to maintain steady growth and investor confidence.
