HP’s profit forecast suggests it can withstand tariff hit
Companies built up PC inventory in the first half of the year to avoid tariffs
[SEATTLE] HP gave a profit outlook for the current quarter that may beat expectations, showing firming demand for computers and interest in new machines that can run the latest artificial intelligence (AI) software.
Earnings, excluding some items, will be 87 US cents to 97 US cents a share in the period ending in October, the maker of computers and printers said on Wednesday (Aug 27). Analysts, on average, estimated 91 US cents.
In the fiscal third-quarter ended Jul 31, HP reported sales climbed 3.1 per cent to US$13.9 billion. Profit, excluding some items, was 75 US cents a share. Analysts, on average, projected adjusted earnings per share of 74 US cents on revenue of US$13.7 billion.
Sales of PCs rose 6 per cent in the quarter and the company expects “mid-single digit” growth to continue in the current period, chief executive officer Enrique Lores said. Business customers are upgrading to machines with Microsoft’s Windows 11 and new AI PCs, which now make up more than 25 per cent of HP’s product mix, a milestone reached a quarter ahead of the company’s target. Consumer PC sales were also better than expected last quarter, 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.”
The shares gained about 3 per cent in extended trading after closing at US$27.11 in New York. The stock has declined 17 per cent this year.
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To cope with the impact of tariffs, HP has adjusted to build almost all of its products sold in North America outside China and also increased some prices, Lores said. Still, the industry is being buffeted by economic uncertainty and higher costs tied to US President Donald Trump’s trade policies.
“It all depends on the market from here,” chief financial officer Karen Parkhill said in an interview when asked about the profit forecast range. “All the signs that we are seeing from a market perspective are strong, particularly in PCs, and we expect that to continue. Should there be some shock to the market, we could potentially be at the downside (of the forecast).”
Parkhill said improvements that lead to greater consumer demand for new PCs, which HP experienced in the quarter, could push the company “above the midpoint” of the profit forecast.
Revenue in the personal systems unit rose 6 per cent to US$9.9 billion. Commercial PC sales gained about 5 per cent to US$7 billion while consumer revenue rose 8 per cent to almost US$2.9 billion.
A recovery in the long-ailing personal computer market has started to materialise, but US tariffs have increased uncertainty. Shipments of PCs rose 4.4 per cent in the June quarter, according to Gartner, an industry research firm, fuelled 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 last month. Lores said that HP has not seen “material” pulling forward of purchases.
In HP’s printer business, where revenue declined, the company is focusing on higher-priced and more profitable products in order to improve margins, he said. BLOOMBERG
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