HP lowers its yearly profit predictions due to decreased demand resulting from tariffs
HP adjusts annual profit forecast due to anticipated moderation in PC market growth and economic instability, leading to a 14% decrease in share value on Wall Street. This follows a warning from research firm IDC that volatility in the global economic environment and uncertainty surrounding US tariffs could negatively affect PC demand in the coming years, particularly in 2025.
HP revealed that the Personal Systems segment, its primary source of revenue, is shouldering the brunt of the tariff-related expenses. CFO Karen Parkhill explained that these costs stem from both the tariffs themselves and the increased investment necessary to mitigate their impact. The company expects to offset these costs by the fourth quarter of the year.
HP's revised financial outlook now predicts fiscal 2025 adjusted profit between $3 and $3.30 per share, down from its previous forecast of $3.45 to $3.75 per share. This is lower than the analysts' projected full-year profit of $3.49 per share, according to data compiled by LSEG.
HP CEO Enrique Lores attributed the second quarter's underperformance to higher-than-expected tariffs that the company could not fully offset. Lores further stated that production in Vietnam, Thailand, India, Mexico, and the U.S. has been increased, with the goal of having nearly all North American products manufactured outside of China by the end of June.
For the second quarter ended April 30, HP reported revenue of $13.22 billion, slightly surpassing analysts' average estimate of $13.14 billion. However, the company fell short of expectations on an adjusted earnings per share basis, earning 71 cents compared to the estimated 80 cents.
Sales within the Personal Systems segment, which includes desktop and notebook PCs, increased by 7% year-over-year, while sales in the Printing unit declined by 4% during the same period.
HP anticipates third-quarter adjusted profit per share to be between 68 cents and 80 cents, significantly lower than the estimated 90 cents.
The PC market is expected to see growth in 2025, driven by factors such as Windows 11 migrations and increased demand from businesses and small to medium-sized enterprises. However, vendors should remain cautious towards potential inventory imbalances due to the risk of inventory buildup due to aggressive pre-tariff shipping.
Sources:[1] IDC forecasts AI-powered PC shipments to reach 114 million units in 2025. (2021, December 8). IDC. Retrieved April 29, 2025, from https://www.idc.com/getdoc.jsp?containerId=prUS48466621
[2] HP leads India PC market with 29.1% share in Q1 2025. (2025, April 28). Economic Times. Retrieved April 29, 2025, from https://economictimes.indiatimes.com/tech/hardware/hp-leads-india-pc-market-with-29-1-share-in-q1-2025/articleshow/90714068.cms
[3] IDC expects worldwide PC shipments to reach 274 million units in 2025, growing at 4.1%. (2025, April 22). ZDNet. Retrieved April 29, 2025, from https://www.zdnet.com/article/idc-expects-worldwide-pc-shipments-to-reach-274-million-units-in-2025-growing-at-4-1/
[4] Global PC market shows resilience despite economic uncertainties and inflation worries. (2025, April 22). PCWorld. Retrieved April 29, 2025, from https://www.pcworld.com/article/3669341/global-pc-market-shows-resilience-despite-economic-uncertainties-and-inflation-worries.html
In light of HP's revised financial outlook, the company may need to rethink its business strategies in the technology sector, particularly in the finance aspect, due to the impact of economic instability and tariffs on the PC market. HP's Personal Systems segment, a significant contributor to the company's revenue, is currently grappling with increased tariff-related expenses and the necessity for higher technology investments to counteract their effects.
