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HP Inc.
CEO : Mr. Tuan Tran

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2024 Q4	1.7% YoY	-2.3%	-4.1%	2024-08-28

Karen Parkhill says,

Revenue and Financial Performance

• HP returned to revenue growth for the first time in nine quarters, with Q3 revenue growing 2% nominally and 3% in constant currency.
• Personal Systems segment grew 5% nominally and 11% sequentially, driven by commercial volumes and seasonal strength.
• Overall gross margin was 21.5%, slightly up year-over-year despite dynamic pricing and commodity cost pressures.
• Non-GAAP operating expenses increased due to continued investment, resulting in a non-GAAP operating profit of $1.1 billion, down 7% year-over-year.
• Non-GAAP diluted net earnings per share was $0.83, a year-over-year decrease of $0.03, and GAAP-diluted net earnings per share was $0.65.

Shareholder Returns and Cost-Saving Initiatives

• HP returned nearly $870 million to shareholders through repurchases and dividends, aiming to return approximately 100% of free cash flow in fiscal 2024.
• The Future Ready plan is set to achieve $1.3 billion in cost savings by fiscal year-end 2024, ahead of the initial $1.1 billion target.
• Free cash flow for Q3 was $1.3 billion, contributing to a full-year target of $3.1 billion to $3.6 billion.

Segment Insights and Market Dynamics

• Personal Systems operating margin was at 6.4%, impacted by higher commodity costs and strategic investments.
• Print segment faced a slower market recovery, with revenues down 3% nominally and 2% in constant currency, but maintained market share growth.
• Print operating margin was 17.3%, facing headwinds from pricing pressures and ongoing investments.
• Consumer and commercial revenue in print showed mixed results, with consumer revenue up 2% despite a flat unit count.

Guidance and Future Outlook

• HP anticipates Q4 Personal Systems revenue to grow low to mid-single digits sequentially, with margins expected in the 5% to 7% range.
• Print segment is expected to see low to mid-single digit sequential revenue growth in Q4, with margins near the top of the 16% to 19% range.
• Non-GAAP EPS guidance for the fiscal year 2024 is narrowed to $3.35 to $3.45, while GAAP EPS is expected to be between $2.62 and $2.72.

Operational Developments

• HP is leveraging AI to improve customer service and operational efficiency, particularly in print and commercial operations.
• Efforts in supply-chain optimization and platform reductions are part of the accelerated Future Ready transformation plan.
• The company is focusing on high-value categories and commercial market share growth, in line with strategic priorities.

Enrique Lores says,

Leadership Changes and Strategic Focus

• Karen Parkhill has joined HP as the new CFO, which is expected to impact financial strategies and operations positively.
• Emphasis on building a stronger leadership team as part of overall organizational objectives.
• Introduction of initiatives aimed at long-term profitable growth and leveraging strategic priorities.

Financial Performance and Cost Management

• HP reported a 2% year-over-year revenue growth, marking the first revenue increase in nine quarters.
• Non-GAAP operating profit fell by 7%, with non-GAAP EPS within the outlook range but below expectations.
• The Future Ready program aims to deliver 80% of the three-year structural cost run-rate target by year-end, highlighting a focus on cost reduction.

Innovations and Market Positioning

• Launch of new AI PCs, including a premium model with 55 TOPS of NPU performance, positioning HP at the forefront of AI technology.
• HP’s AI Studio improves AI development with Gen AI trust capabilities, enhancing solution safety and efficiency.
• Strategic advancements in workforce solutions and industrial printing through new partnerships and technologies.

Quarterly Business Segment Analysis

• Personal Systems segment showed a 5% revenue increase year-over-year; operating profit was stable at 6.4%.
• In the Print segment, revenue decreased by 3% year-over-year, with a focus on gaining profitable market share.
• Overall, HP generated strong free cash flow of $1.3 billion, with a commitment to returning $0.9 billion to shareholders.

Segment	YoY Revenue Change	Operating Profit
Personal Systems	+5%	6.4%
Print	-3%	17.3%

Outlook and Future Expectations

• Moderated expectations for Q4 due to a dynamic demand environment and competitive pricing challenges.
• Continued investment in high-value growth areas and accelerated cost-reduction plans.
• HP remains confident in strategy execution, with a focus on AI and hybrid work solutions driving future growth.

Q & A sessions,

Consumer AI PCs Performance

• HPQ expected sales growth for consumer AI PCs was projected around 10% for the second half of the year, and they are slightly exceeding that. This indicates strong performance of the consumer AI PC segment.
• The company launched next-generation AI PCs in collaboration with Qualcomm and AMD, although their impact on current earnings is minimal as shipments have only just begun.
• Consumer adoption of these next-generation AI PCs is expected to outpace commercial adoption due to quicker consumer evaluation processes.

Future Projections for AI PCs

• HPQ maintains its projection that next-generation AI PCs will account for around 50% of shipments by 2027.
• These products are expected to drive an increase in average selling price by 5% to 10%.
• The company remains confident in achieving these projections based on current market reception and strategy.

Print Market Dynamics

• The print market faced challenges without the expected recovery, particularly in the office space, which has seen declining demand.
• Positive growth was observed in the home printing sector, with office category declines less severe than in previous quarters. This indicates some stabilization in the otherwise weak office market.
• Supplies performance met expectations, and usage trends predict future market improvements, suggesting that the current slow recovery could be temporary.

Competitive Pricing and Cost Structure

• Due to the weak yen, competitors have become more aggressive in pricing. HPQ is responding by reducing costs to place profitable units on the market.
• HPQ has maintained market share and even increased share in the home printing market by focusing on cost-efficient strategies.
• The company plans to continue placing profitable units if opportunities arise, indicating a strategic focus on maintaining competitive pricing and market presence.