HP(HPQ 0.69%) reported third-quarter 2025 results on August 27, 2025, posting 3% year-over-year revenue growth, a fifth consecutive positive quarter, and strong performance in personal systems and AI PC (AIPC) adoption. The company maintained profit margins within target ranges, accelerated supply chain diversification, and reaffirmed its full-year free cash flow and earnings guidance. The following highlights provide a detailed look at HP's operating momentum, risk management, and investment thesis updates, supported by direct management commentary.
Personal systems margin returns to target for HP
HP’s personal systems segment, which includes PCs and workstations, delivered a 6% year-over-year revenue gain and reached a 5.4% operating margin, returning to the guidance target range. Sequential revenue was up 10% and units climbed 13%, driven by robust commercial activity, higher average selling prices (ASPs), and strong back-to-school demand in North America and China.
"Importantly, as promised, we drove personal systems operating margin back into our guidance range at 5.4% with our planned mitigation actions."
— Karen Parkhill, Chief Financial Officer
This result demonstrates HP's ability to regain operational leverage through premium product mix optimization and disciplined cost management, supporting the company's long-term earnings growth in a cyclical industry.
AIPC adoption boosts HP's premium mix
Shipments of AI-capable PCs (AIPCs), which integrate local neural processing units (NPUs) for AI workloads, have ramped to over 25% of HP’s PC mix a full quarter ahead of plan, with double-digit sequential revenue growth in the segment. Management confirmed that AIPC units command a 5%-10% ASP uplift compared to non-AIPC products, enhancing the company's premium hardware mix.
"We can confirm the estimations that we had before. We are seeing an uplift in pricing of AIPCs compared to similar units that don't bring this capability. And we maintain the assumptions that we had shared before of the 5% to 10% price increase driven by AIPCs."
— Enrique Lores, President and CEO
This acceleration in high-value hardware mix not only raises near-term revenue and gross margin, but also strengthens HP's competitive position as enterprises and consumers transition to AI-integrated devices.
HP supply chain transformation reduces tariff risk
HP completed a strategic migration of manufacturing for nearly all North American products from China to facilities in Vietnam, Thailand, Mexico, and the U.S., significantly reducing tariff exposure. Management reported that the majority of tariff-related costs were mitigated during the third quarter of fiscal 2025, supporting gross margin stabilization and business agility.
"This quarter, as planned, nearly all products sold in North America are now built outside of China, helping to further reduce trade-related costs. We continue to ramp up production across Vietnam, Thailand, Mexico, and the US."
— Enrique Lores, President and CEO
By localizing production and diversifying its supply base, HP reduces future exposure to trade frictions, protects profitability under shifting tariff regimes, and improves resilience relative to less-nimble competitors.
Looking Ahead
Management reiterated full-year free cash flow guidance of $2.6 billion to $3 billion and set a non-GAAP EPS target of $0.87 to $0.97 for the fiscal fourth quarter. Personal systems operating margin is projected within the 5%-7% target range, and print operating margin is expected near the top of the 16%-19% range in the fiscal fourth quarter. HP will outline long-term strategic targets and capital allocation plans at its Investor Day in early 2026.
