HP Stock Falls 8% on Q2 Earnings Miss, Revenues Rise Y/Y

HP Inc. HPQ shares fell 7.8% during Wednesday’s after-market hours after the personal computer (PC) maker reported lower-than-expected bottom-line results for second-quarter fiscal 2025 and issued a profit outlook for the fiscal third quarter that fell short of the Zacks Consensus Estimate.

HP reported second-quarter non-GAAP earnings of 71 cents per share, missing the consensus estimate by 11.3%. The bottom line declined 13% from the year-ago quarter’s earnings of 82 cents.

HP’s earnings missed the Zacks Consensus Estimate in each of the trailing four quarters, the average negative surprise being 4.3%.

HPQ’s revenues increased 2.4% year over year to $13.2 billion, which missed the Zacks Consensus Estimate by 1.7%. The year-over-year growth was primarily driven by higher Personal Systems (PS) sales, which more than offset the negative impact of lower revenues in the Printing business.

HP Inc. Price, Consensus and EPS Surprise

HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote

HPQ’s Q2 Top-Line Details

PS revenues (68.2% of net revenues) came in at $9 billion, which improved 7% from the year-ago quarter’s figure (8% up at constant currency or cc). The upside in this division was mainly driven by higher commercial volume, increased ASPs and momentum in Key Growth Areas.

HP’s total PC units sold were up 6% on a year-over-year basis, an increase of 11% in Commercial PS shipments, partially offset by a 2% decrease in Consumer PS shipments. Revenues from the Commercial PS segment increased 9% year over year, while the Consumer PS segment sales increased 2%.

The Printing business’ revenues (31.8% of net revenues) decreased 4% year over year (down 3% at cc) to $4.2 billion. Weakness in the Commercial Printing business and Supplies led to an overall decline in the segment’s revenues.

Both Consumer Printing net revenues and Commercial Printing net revenues declined 3%. Supplies net revenues were down 5% (down 3% in cc) year over year. Total hardware units increased 1%, with Consumer Printing units up 3% and Commercial Printing units down 3%.

The company witnessed growth across all regions. On a constant currency basis, the Americas rose 4.7%, the EMEA region witnessed growth of 1.5% and the Asia Pacific and Japan revenues increased 8.8% year over year.

Operating Results of HP

Segment-wise, PS’ non-GAAP operating margin contracted 150 basis points (bps) to 4.5%. The Printing division’s non-GAAP operating margin contracted 50 bps to 19.5%.

HP’s overall non-GAAP operating margin from continuing operations of 9% contracted 120 bps year over year.

HPQ’s Balance Sheet and Cash Flow

HP ended the fiscal second quarter with cash, cash equivalents and restricted cash of $2.73 billion, down from $2.89 billion at the end of the previous quarter.

During the quarter, HPQ generated $38 million worth of cash from operational activities while having negative free cash flow of $95 million. In the first half of fiscal 2025, it generated operating cash flow of $412 million.

During the second quarter, the company repurchased shares worth $100 million and paid $273 million in dividend payments. During the first half of fiscal 2025, it paid $546 million in dividends and bought back shares worth $200 million.

HP Updates Q3 and FY25 Guidance

For the third quarter of fiscal 2025, the company estimates non-GAAP EPS between 68 cents and 80 cents. The Zacks Consensus Estimate is pegged at 82 cents.

The company lowered its bottom-line guidance for fiscal 2025. For fiscal 2025, it now expects non-GAAP EPS between $3.00 and $3.30, up from the previously guided range of $3.06-$3.36. The Zacks Consensus Estimate is pegged at $3.44 per share. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

HPQ expects its free cash flow to be in the range of $2.6-$3.0 billion for fiscal 2025.

HP’s Zacks Rank & Stocks to Consider

HPQ currently carries a Zacks Rank #3 (Hold).

Paylocity Holding PCTY, StoneCo STNE and BlackBerry BB are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

PCTY, STNE and BB sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTY shares have declined 2.8% year to date. The Zacks Consensus Estimate for PCTY’s full-year 2025 earnings is pegged at $6.95 per share, up by 4.51% over the past 30 days, indicating an increase of 0.99% from the year-ago quarter’s reported figure.

STNE shares have surged 67.4% year to date. The Zacks Consensus Estimate for STNE’s full-year 2025 earnings is pegged at $1.43 per share, up by 3.62% over the past 30 days, indicating a gain of 5.93% from the year-ago quarter’s reported figure.

BB shares have gained 8.2% year to date. The Zacks Consensus Estimate for BB’s full-year 2025 earnings per share is pegged at 10 cents, unchanged over the past 30 days, indicating a gain of 400% from the year-ago quarter’s reported figure.

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This article originally published on Zacks Investment Research (zacks.com).

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