HPQ Earnings Preview: AI PC Demand and Print Segment Pressures in Focus

HP Inc. is set to report its fiscal first-quarter 2025 earnings on Tuesday, February 27, at 4:15 p.m. ET. Analysts expect earnings per share of $0.74, aligning with HP’s guidance range of $0.70 to $0.76, but representing an 8.6% decline year-over-year. Revenue is projected at $13.35 billion, reflecting a 1.25% increase from the prior year.

Investors will be watching for signs of a recovery in PC demand, particularly AI-driven models, and how HP’s printing business is holding up against ongoing declines. The company has introduced a range of AI-powered PCs, but adoption has been slow. Meanwhile, the print segment, which has historically been a key profit driver, faces challenges from weaker consumer demand and pricing pressures.

Key Drivers to Watch

HP’s results will be shaped by two major factors: the potential recovery in PC sales, fueled by AI and Windows 10 end-of-life upgrades, and the continued decline in the printing segment.

AI PCs and the PC Refresh Cycle

HP has been betting on AI-powered personal computers to drive its next phase of growth. The company has launched several AI-integrated models, including the HP OmniBook Ultra Flip, HP EliteBook X, and Z by HP Gen AI Lab. However, the adoption of AI PCs has been slower than initially expected.

Another potential catalyst is the upcoming Windows 10 end-of-life cycle in October 2025, which could push corporate and consumer upgrades to Windows 11. While analysts expect some impact, the anticipated surge in PC sales has not yet materialized.

For this quarter, analysts estimate $9.06 billion in Personal Systems (PC) sales, representing a 3% increase year-over-year. While this signals modest growth, it remains well below the pandemic-driven highs of 2021 and 2022, when PC revenue exceeded $40 billion annually.

The Struggles of HP’s Printing Segment

HP’s printing division remains a drag on overall performance. Analysts expect $4.26 billion in printing sales, a 3% decline year-over-year.

The print business follows a “razor-and-blade” model, where printers are sold at low margins while ink and toner generate higher profits. However, revenue from printing supplies has steadily declined, particularly in China and other emerging markets.

Despite weaker revenue, the print business still operates with much higher margins than the PC segment. HP guided for print operating margins near the top of its long-term range of 16% to 19%, which should help offset some of the revenue declines.

Analyst Expectations and Market Sentiment

Wall Street remains cautious on HP stock, with a consensus price target of $37, implying modest upside from its current trading level around $34.

Bank of America expects results to be largely in line with estimates, modeling $13.3 billion in revenue and $0.74 EPS. While cost-cutting efforts and share buybacks should help stabilize earnings, the firm believes that headwinds in the print business will limit any upside from a PC recovery.

Overall, analysts are skeptical that a meaningful PC rebound has begun, though some believe the refresh cycle could gain traction later in 2025.

Recap of HP’s Prior Earnings Performance

In the fourth quarter of fiscal 2024, HP’s results reflected a mix of strengths and weaknesses.

- Personal Systems revenue (PCs) increased 3% year-over-year, suggesting early signs of a recovery.

- Printing revenue declined as expected, though operating margins remained strong.

- Earnings per share slightly exceeded estimates, but revenue growth remained tepid.

- The company has beaten EPS estimates in two of the last four quarters but missed twice as well, with an average negative surprise of 0.83%.

For the first quarter of 2025, HP’s guidance suggests flat to slightly negative EPS growth, reinforcing the cautious sentiment surrounding the stock.

Stock Performance and Valuation

HP’s stock has traded sideways for much of 2024, reflecting investor uncertainty over the company’s growth outlook. HP currently trades at a forward price-to-earnings ratio of approximately 10x, below the broader tech sector but in line with other mature hardware companies like Dell.

The company’s 3% dividend yield continues to make it attractive for income investors, but growth investors may wait for clearer signs of a PC demand recovery before taking a more aggressive position.

Key Questions for HP’s Earnings Call

1. What are management’s latest expectations for AI PC adoption?

2. Is the Windows 10 end-of-life cycle driving early PC upgrade activity?

3. How much pressure will the print segment face in 2025, and will margins hold up?

4. What impact is the macroeconomic environment having on consumer and enterprise spending?

5. What role will share buybacks play in supporting earnings growth?

Final Thoughts

HP’s first-quarter report is unlikely to deliver major surprises, but investors will be looking for clues on the trajectory of the AI PC market and the timing of the Windows 10 refresh cycle. While HP’s strong cost management and buybacks should help offset weak print sales, the stock remains in a wait-and-see phase for many investors.

If HP delivers a solid update on AI PC demand or stronger-than-expected print margins, the stock could see modest upside. However, if the company fails to provide clear catalysts for growth, HP may continue trading in a narrow range until later in 2025, when the PC upgrade cycle accelerates.