HP Inc. (HPQ) will announce its fiscal Q3 2025 financial results after the U.S. market closes on August 27, 2025. Recent tariff and cost structure pressures have created headwinds, leaving investors balancing expectations for H2 demand recovery against growing concerns.

Market Forecast
HP is projected to post Q3 revenue of $13.72 billion, a modest 1.5% YoY increase. Gross margin is expected to contract to 20.6% (down 3.68pp YoY) amid industry competition and tariff impacts. Adjusted EPS is forecast at $0.74.

Previous Quarter Review
Fiscal Q2 revenue rose 3.3% YoY to $13.22 billion. Gross margin softened slightly due to tariffs and raw material volatility, while net profit fell ~33% YoY to $406 million. Net margin declined to 3.07%, and adjusted EPS was $0.71 (down 13% YoY).
The quarter reflected revenue growth but profit pressure, driven by supply-chain restructuring costs from tariffs and weakening demand for some printing products in key markets. Personal Systems showed resilience, while Printing remained soft amid macroeconomic challenges and regional pricing pressure.

Current Quarter Outlook
Personal Systems: Growth Continues but Margins Squeezed
Personal Systems revenue is expected to grow ~5% YoY, fueled by enterprise demand for AI-enabled devices and emerging-market appetite for cost-effective products. However, margin improvement faces hurdles:

• Supply-chain adjustments increased notebook production costs by $8–12/unit;

• U.S. tariffs forced price hikes, potentially dampening demand;

• Intensified competition (e.g., Dell, Lenovo accelerating AI PC rollouts) may trigger price wars.
  HP’s PC share in China fell to 9% (Q2 2025), down from 10% year prior, ranking fifth amid tariffs and local brand competition. While expanding production in Thailand and Mexico will reduce China reliance, this transition will pressure near-term margins.

Printing Business: Decline Persists Amid Uncertain Transformation
Printing revenue is set to weaken further as "cash cow" supplies profitability erodes:

• Rising Chinese labor costs;

• Declining consumables demand due to paperless trends.
  HP aims to boost margins via premium supplies and subscription services, but analysts expect slow traction. Its long-term shift toward cloud/mobile printing and 3D printing faces challenges: the 3D market may reach only $4B by 2025, and 71% of users remain unfamiliar with the technology.

Inadequate R&D Risks AI PC Competitiveness
HP actively launched NPU-equipped devices (e.g., OmniBook series) last quarter but spends just 2.1% on R&D—below Dell/Lenovo and half its peak levels. This may impede AI PC innovation despite the upcoming OmniBook’s local AI features (e.g., document indexing). While partnering with Chongqing on AI collaboration, HP’s strategic missteps (e.g., rapid discounting of Slate6/7) highlight pricing instability. With AI PCs projected to capture 50% market share in three years, insufficient R&D could hamper long-term growth.

Analyst Views

• J.P. Morgan’s Samik Chatterjee lowered HP’s target to $27 (from $30), citing "challenging macro conditions in non-AI-driven IT." Tariff uncertainties and potential retaliatory duties remain key risks; 2025 revenue/profit estimates were cut.

• BofA Securities reiterated "Neutral," trimming the target to $29 (from $33). EPS growth relies on buybacks, while PC refresh gains may be offset by printing margin erosion. Full-year performance may hit guidance lows due to tariffs, capacity shifts, and weak PC demand.

• Citi called HP’s supply-chain diversification "necessary yet painful"—potentially reducing geopolitical risk long-term but pressuring near-term profits. Price hikes and supply adjustments may offset tariff impacts by fiscal Q4 2025, though Q3 will still bear significant pressure.