HP (HPQ 0.37%), a leading global provider of personal computers, printers, and related services, reported its fiscal third quarter results on August 27, 2025. HP posted GAAP net revenue of $13.9 billion, topping analyst consensus estimates of $13.69 billion (GAAP) and marking its fifth straight quarter of revenue growth. While GAAP revenue exceeded expectations, non-GAAP diluted earnings per share declined to $0.75, a drop of 10.7 % compared to the same period last year. GAAP diluted earnings per share increased to $0.80, up 23 % year over year, partly due to tax adjustments and a one-time litigation gain. Profit margins contracted from a year ago, with both GAAP and non-GAAP operating margins decreasing. Overall, the quarter demonstrated continued growth in sales, especially in Personal Systems, but also highlighted ongoing profit and margin challenges.
| Metric | Q3 2025 | Q3 2024 | Y/Y Change |
|---|---|---|---|
| Diluted Net EPS (Non-GAAP) | $0.75 | $0.84 | (10.7%) |
| Net Revenue | $13.9 billion | $13.5 billion | 3.0 % |
| Operating Margin | 5.1 % | 7.0 % | (1.9 pts) |
| Operating Margin (Non-GAAP) | 7.1 % | 8.2 % | (1.1 pts) |
| Free Cash Flow | $1.5 billion | $1.3 billion | 15 % |
Business Overview and Key Focus Areas
HP is one of the world’s largest manufacturers of personal computers (PCs), printers, and associated services. Its operations are split into three main segments: Personal Systems, Printing, and Corporate Investments. Its broad product lineup covers commercial and consumer desktops, laptops, workstations, and a wide range of inkjet and laser printers for both home and enterprise users.
In recent years, HP has made strategic moves to address fast-changing technology trends and competitive pressures. The company has focused on innovation in artificial intelligence (AI), integrating AI PCs (personal computers equipped with AI-specific hardware and features) and advanced print technologies. Security is another priority, with the company emphasizing new device-level protections as cyber threats become more complex. HP also prioritizes sustainability initiatives, aiming to reduce emissions and promote responsible sourcing.
Quarterly Performance: Revenue Growth, Margin Pressure, and Segment Breakdown
The third quarter delivered top-line growth, with GAAP net revenue up 3.1% year-over-year. The company’s $13.9 billion result beat consensus estimates and extended a multi-quarter growth streak, which management attributed to steady demand for its Personal Systems offerings and operational execution. According to the release, CEO Enrique Lores said, “In Q3 we delivered a fifth consecutive quarter of revenue growth, driven by strength in Personal Systems and strong momentum in our key growth areas,”
The Personal Systems segment, which covers consumer and commercial PCs, achieved GAAP revenue of $9.9 billion—up 6% year over year. Both consumer and commercial sides delivered growth, with Consumer Personal Systems revenue up 8% and Commercial Personal Systems revenue was up 5% year over year. Total PC unit volumes grew 5%, including strong momentum in AI PCs, which the company has targeted as a key area for expansion. Consumer PC units rose 8% while commercial units increased 3%. Operating margin for Personal Systems was 5.4 %, down from 6.6 % in the prior year quarter, but improved sequentially.
The Printing segment continued to face structural challenges. Revenue declined 4 % year over year to $4.0 billion. Both Consumer Printing and Commercial Printing businesses recorded declines, with respective year-over-year drops of 8% and 3%. Supplies revenue, which comes from sales of ink, toner, and related consumables, was down 4%. Overall hardware unit sales in Printing fell 9%, as both consumer and commercial placements decreased. The segment’s operating margin held steady at 17.3%, unchanged from the same period last year. However, falling hardware placements may have future implications for the company’s high-margin supplies business.
Profitability remained under pressure. GAAP operating margin dropped to 5.1%, a decrease of 1.9 percentage points from a year ago while Non-GAAP operating margin slipped to 7.1% from 8.2% in Q3 FY2024. The margin contraction reflected ongoing challenges, including higher input costs. Despite these pressures, GAAP earnings per share climbed 23.1% year over year, benefiting from tax and litigation-related gains. However, underlying core profitability—as shown by non-GAAP EPS and net income—declined, highlighting that headline gains did not fully translate into operational improvement.
Cash flow was a positive note. Operating cash flow rose 17% year over year to $1.7 billion and free cash flow (non-GAAP) improved 13% year over year to $1.5 billion and return $272 million in dividends to shareholders. HP also repurchased $150 million in its own shares. Balance sheet liquidity stayed strong, with $2.9 billion in gross cash on hand and the company completed a shift in manufacturing out of China for North American sales. This supply chain transition is intended to reduce future trade-related risks.
Security remained a selling point, particularly for commercial clients, but the quarter did not provide new quantitative disclosures on its financial impact. Sustainability efforts were referenced, reiterating HP’s commitment to environmental goals, although no new data was shared this quarter.
Innovation, Competitive Positioning, and Strategic Outlook
AI integration is one of HP’s leading focus areas. AI PCs—computers with specialized hardware and software for AI-driven functions—are a pillar of its innovation strategy. The company reported that the mix of AI-enabled product shipments continues to rise, and plans for these models to represent more than 25% of the PC business by the end of the year. Customer demand for smarter, secure, and connected devices is influencing product development, and HP continues to invest heavily in this area. Alongside AI, HP emphasizes advanced security capabilities, such as device-level protections and endpoint management, which play an important role for enterprise clients needing to safeguard sensitive data.
HP’s continued supply chain transformation stands out as a risk-management move. By wrapping up its re-shoring initiative—moving most manufacturing out of China for North American markets—the company has mitigated exposure to evolving trade regulations and tariffs.
Looking Ahead: Guidance and Key Factors to Watch
For Q4 FY2025, HP management issued guidance for GAAP diluted earnings per share of $0.75 to $0.85 and Non-GAAP EPS of $0.87 to $0.97. Full-year free cash flow for FY2025 is expected to reach $2.6 to $3.0 billion, in line with prior forecasts. No significant changes were made to previous financial guidance. The company stated that current U.S. trade regulations will continue to add costs, but expects cost mitigation and its supply chain changes to limit the impact going forward. Management remains confident in sequential improvement in operating performance, supported by the roll-out of Windows 11-based PCs and rising demand for AI-enabled models.
Investors should watch for margin recovery in upcoming periods, as well as performance in the Printing segment, where declining hardware placements could impact high-margin supplies sales. Trends in AI PC adoption, effectiveness of security solutions, and continued success in reshoring manufacturing will also be crucial, especially as global technology demand remains unpredictable.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
