HP Earnings Miss and Guidance Cut Weighs on Stock Performance

HPQ experiences an 11% drop following an earnings miss and lowered guidance. The company's revenue growth contrasts sharply with declining net income predictions, casting doubts on its future performance.

Date: 31-05-2025

AI Rating: 4

HP's Recent Performance Overview

HPQ recently reported its fiscal second quarter results for 2025, revealing a mixed bag for investors. While the company's net revenue did increase to $13.2 billion, reflecting a 3% year-over-year growth, the non-GAAP net income plummeted to $678 million, equivalent to $0.71 per share. This marked a significant drop compared to the $812 million profit from the same period last year.

Analysts had forecasted adjusted earnings per share (EPS) of $0.79, highlighting a substantial earnings miss that has led to investor discontent. This disparity between increasing revenues and falling profitability raises concerns about the sustainability of HP’s growth trajectory.

Impact of Lowered Guidance

Adding to the negative sentiment, HP has cut its guidance for adjusted earnings per share for the fiscal year from an initial projection of $3.45 to $3.75 down to a revised estimate of $3.00 to $3.30. This reduction is widely regarded as a signal that the company's profitability pressures may persist in the near term.

Further compounding these issues, HP has indicated challenges related to tariffs affecting its operations, given its reliance on overseas component sourcing. These external pressures are likely to contribute further to an already sluggish PC market, especially against the backdrop of combined challenges such as sustained interest in mobile devices.

Future Cash Flow and Operational Outlook

HP estimates that free cash flow will be in the range of $2.6 billion to $3 billion, which remains a positive point amid otherwise disappointing financials. However, the pressures highlighted in the recent report suggest that sustaining strong profitability despite revenue growth may become increasingly difficult for HP.

Overall, given the earnings miss, lowered guidance, and external operational challenges, investor confidence in HPQ is likely to diminish in the short term. As the PC market remains stagnant and the company's operational challenges become more apparent, HPQ’s stock could face further downward pressure.

Stocks: HPQ