HP’s Profit Forecast Suggests It Can Withstand Tariff Hit

HP headquarters in Palo Alto, California.

(Bloomberg) -- HP Inc. gave a profit outlook for the current quarter that was in line with expectations, but investors remain concerned about the impact of economic uncertainty and higher costs tied to President Donald Trump’s trade policies.

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Earnings, excluding some items, will be 87 cents to 97 cents a share in the period ending in October, the maker of computers and printers said Wednesday in a statement. Analysts, on average, estimated 91 cents.

In the fiscal third-quarter ended July 31, HP reported sales climbed 3.1% to $13.9 billion. Profit, excluding some items, was 75 cents a share. Analysts, on average, projected adjusted earnings per share of 74 cents on revenue of $13.7 billion.

To cope with the effects of tariffs, HP has adjusted to use manufacturing facilities outside of China for almost all of its products sold in North America, and the company has increased some prices, Chief Executive Officer Enrique Lores said in an interview.

The company was able “mitigate the majority of the tariff costs in Q3, while still delivering EPS slightly above the midpoint of our guide,” Chief Financial Officer Karen Parkhill said in response to analysts’ questions during a conference call after the results were released. “As we’ve said, we do expect to fully offset these trade-related costs as quickly as possible. And the full benefit of our mitigating actions really depending on the scope can take a little bit of time. But again, we expect to fully mitigate as quickly as we can.”

In the fiscal third quarter, sales of PCs rose 6% and the company expects “mid-single digit” growth to continue in the current period, Lores said in the interview. Business customers are upgrading to machines with Microsoft Inc.’s Windows 11 and new AI PCs, which now make up more than 25% of HP’s product mix, a milestone reached a quarter ahead of the company’s target. Consumer PC sales were also better than expected, he said.

“We feel confident about the fact that PCs will continue to grow,” Lores said. “AI PCs and Windows 11 are going to continue to drive demand.”

Sales in the company’s printer unit, however, declined 4% to $3.99 billion, missing estimates, and continue to be a drag on profitability.

Profit margins in the printer business were worse than in the previous quarter, but the company forecast an improvement in the current period. The company is focusing on higher-priced and more profitable printers in order to improve margins, Lores said.

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The shares declined about 2% in extended trading after initially jumping as much as 8% when the results were released. The stock closed at $27.11 in New York and has declined 17% this year.

“All the signs that we’re seeing from a market perspective are strong, particularly in PCs, and we expect that to continue,” Parkhill said in an interview. “Should there be some shock to the market, we could potentially be at the downside (of the forecast).”

Fiscal third-quarter revenue in the personal systems unit rose 6% to $9.93 billion. Commercial PC sales gained about 5% to $7.04 billion while consumer revenue rose 8% to almost $2.9 billion.

A recovery in the long-ailing personal computer market has started to materialize, but US tariffs have increased uncertainty. Shipments of PCs rose 4.4% in the June quarter, according to Gartner, an industry research firm, fueled by corporate customers upgrading to Windows 11 machines and replacing devices purchased during the pandemic. Consumer demand lagged with buyers delaying purchases, the research firm said.

Companies built up PC inventory in the first half of the year to avoid tariffs. “In the second half of 2025, shipment growth is expected to plateau as vendors draw down stock in response to demand, potentially creating excess inventory by year-end,” Gartner said in a statement last month. Lores said HP has not seen “material” pulling forward of purchases.

(Updates with comments from the chief financial officer in the fifth paragraph.)

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