10-K: HP Inc. Reports FY25 Revenue Growth Amid Profit Decline

HP Inc. reported a 3.2% increase in total net revenue for fiscal year 2025, driven by Personal Systems unit volume growth and services, despite declines in Printing revenue and higher commodity costs, leading to a decrease in net earnings and diluted EPS.

Summary

• Total net revenue for fiscal year 2025 increased by 3.2% to $55.295 billion (3.7% on a constant currency basis) compared to the prior year.
• Net earnings decreased to $2.529 billion in fiscal year 2025 from $2.775 billion in fiscal year 2024.
• Diluted net earnings per share (EPS) decreased to $2.65 in fiscal year 2025 from $2.81 in fiscal year 2024.
• Gross margin decreased by 1.5 percentage points, primarily due to higher commodity and tariff costs, mix shifts towards Personal Systems, and unfavorable currency impacts.
• Personal Systems net revenue increased by 6.5% (6.7% on a constant currency basis), driven by a 4.3% increase in unit volume and a 3.1% increase in average selling prices (ASPs).
• Printing net revenue decreased by 3.7% (2.7% on a constant currency basis), with declines across Supplies, Commercial Printing, and Consumer Printing.
• Net cash provided by operating activities decreased by $0.1 billion to $3.697 billion in fiscal year 2025.
• HP returned $1.9 billion to shareholders in fiscal year 2025, comprising $1.1 billion in cash dividends and $0.8 billion in share repurchases.
• The company announced the Fiscal 2026 Plan in November 2025, aiming to drive customer satisfaction, product innovation, and productivity through AI adoption and enablement, with an expected workforce reduction of approximately 4,000 to 6,000 employees through fiscal year 2028.
• A previously identified material weakness in internal control over financial reporting related to IT general controls was remediated as of October 31, 2025.

Sentiment

Score: 4

Explanation: While Personal Systems showed growth and AI initiatives are promising, overall net earnings and EPS declined, gross margin compressed, and the Printing segment continued to struggle. Macroeconomic headwinds and competitive pressures remain significant concerns, leading to a cautious outlook despite strategic efforts.

Positives

• Total net revenue increased 3.2% (3.7% constant currency) in fiscal year 2025, indicating overall top-line growth.
• Personal Systems net revenue grew by 6.5% (6.7% constant currency), driven by a 4.3% increase in unit volume, notably from the Windows-based PC operating system refresh.
• Commercial Personal Systems net revenue increased 7.7%, with a 6.4% increase in units and a 2.7% increase in ASPs, reflecting strong performance in the business segment.
• Consumer Personal Systems net revenue increased 3.6%, supported by a 1.2% increase in units and a 2.3% increase in ASPs.
• Services net revenue increased, contributing positively to overall revenue growth.
• Disciplined pricing actions and cost savings from the Future Ready transformation partially offset gross margin declines.
• Research and development (R&D) expense decreased by 2.3% due to disciplined cost savings.
• Acquisition and divestiture charges decreased by $38 million, reflecting reduced integration activities.
• Interest and other, net, decreased by $33 million, partly due to a gain from a single litigation matter and lower factoring costs.
• The effective tax rate was 5.2% in fiscal year 2025, benefiting from $415 million of net income tax benefits related to non-recurring items.
• Successfully remediated a previously reported material weakness in internal control over financial reporting, enhancing financial reporting reliability.
• HP is actively investing in and accelerating the delivery of AI across its product portfolio, including new AI PCs and intelligent print features.
• The company returned $1.9 billion to shareholders in fiscal year 2025 through cash dividends and share repurchases, demonstrating commitment to shareholder returns.
• Maintained a $5.0 billion sustainability-linked senior unsecured committed revolving credit facility, providing strong liquidity.

Negatives

• Net earnings decreased to $2.529 billion in fiscal year 2025 from $2.775 billion in fiscal year 2024, indicating a decline in profitability.
• Diluted net EPS decreased to $2.65 in fiscal year 2025 from $2.81 in fiscal year 2024.
• Gross margin decreased by 1.5 percentage points, primarily due to higher commodity and tariff costs, mix shifts towards Personal Systems, and unfavorable currency impacts.
• Printing net revenue decreased by 3.7% (2.7% constant currency), indicating ongoing challenges in this segment.
• Supplies net revenue decreased 3.4%, attributed to a decline in the installed base and usage, and currency impacts.
• Printer unit volume decreased 4.2% due to demand softness, and hardware ASPs decreased 1.5% in the Printing segment.
• Commercial Printing net revenue decreased 4.3%, primarily due to a 6.2% decrease in printer unit volume.
• Consumer Printing net revenue decreased 4.1%, driven by a 3.1% decrease in printer unit volume.
• Selling, general and administrative (SG&A) expense increased 2.9%, primarily due to higher litigation costs.
• Amortization of intangible assets increased due to impairment charges of $65 million related to acquired customer contracts and $27 million for technology and patents.
• Net cash provided by operating activities decreased by $0.1 billion, indicating a slight reduction in operational cash generation.
• The cash conversion cycle increased to -38 days from -42 days, primarily due to an increase in Days of Sales Outstanding (DSO) and Days of Supply in Inventory (DOS).
• Higher investment in property, plant, equipment, and purchased intangibles, increasing net cash used in investing activities by $0.5 billion.
• The company continues to face macroeconomic challenges, including market uncertainty, cautious commercial spending, lower discretionary consumer spending, increasing commodity costs (memory and storage), inflationary pressures, tariffs, and foreign currency fluctuations.
• Competition from non-original supplies in the Printing business continues to exert pressure on market share and profitability.
• Reliance on single-source suppliers for certain key components poses a supply chain risk.

Risks

• Inability to successfully execute strategic plans, including business model changes and transformation initiatives.
• Challenges in developing and transitioning new products and services, and enhancing existing ones, to meet evolving customer needs and technological trends, including artificial intelligence.
• The impact of macroeconomic and geopolitical trends, changes, and events, such as global trade policies, military conflicts, and tensions in key regions.
• Volatility in global capital markets, foreign currency exchange rates, changes in benchmark interest rates, the effects of inflation, and instability of financial institutions.
• Risks associated with international operations and business disruption events, including those resulting from climate change.
• Heavy dependence on third-party suppliers, leading to potential supply constraints, component shortages, logistics challenges, and manufacturing disruptions.
• Intense competitive pressures across all business areas, including price competition and the introduction of new products and business models by competitors.
• Impact of third-party claims of intellectual property infringement, which can be costly to defend and may disrupt business operations.
• Challenges in accurately forecasting inventories, demand, and pricing, particularly due to the multi-tiered distribution network and uneven sales cycles.
• Difficulties in attracting, retaining, training, motivating, developing, and transitioning key employees.
• Failure to achieve some or all of the expected benefits of restructuring plans (e.g., Fiscal 2023 Plan, Fiscal 2026 Plan), which may also cause business disruption.
• Disruptions in operations from system security risks, data protection breaches, cyberattacks, system outages, and systems integration issues.
• Inability to maintain credit ratings, satisfy debt obligations, and complete contemplated share repurchases or other capital return programs.
• Changes in estimates and assumptions made in connection with the preparation of financial statements could adversely affect results.
• Impact of changes to federal, state, local, and foreign laws and regulations, including environmental regulations, tax laws, and emerging AI regulations.
• Integration and other risks associated with business combination and investment transactions.
• Reputational and performance risks related to environmental and societal matters, including failure to meet sustainability goals or comply with evolving disclosure requirements.
• Anti-takeover provisions in the company's certificate of incorporation and bylaws, as well as Delaware law, could impair a takeover attempt.
• Risks associated with services businesses, including customer retention, contract renewals, and profitability of new service models.
• Uneven sales cycle making planning and inventory management difficult and future financial results less predictable.
• Potential adverse outcomes from litigation and regulatory proceedings, including copyright levies and patent infringement claims.
• Risks related to cross-indemnities with Hewlett Packard Enterprise if they are unable to satisfy their obligations.
• Failure to comply with customer and partner contracts or government contracting regulations could result in loss of business or penalties.
• Changes in tax provisions, adverse tax audits, or the adoption of new tax legislation could materially impact financial performance.
• Ineffective internal controls could impact business and operating results.

Future Outlook

HP anticipates continued macroeconomic challenges, including market uncertainty, cautious commercial spending, lower discretionary consumer spending, increasing commodity costs (especially memory and storage), inflationary pressures, tariffs, and foreign currency fluctuations in the short-term. The company is strategically focused on driving innovation, particularly with AI PCs and intelligent print solutions, and expanding into growth opportunities in commercial, solutions, and premium consumer and gaming markets. The new Fiscal 2026 Plan, running through fiscal year 2028, aims to enhance customer satisfaction, product innovation, and productivity through AI adoption and enablement, with expected investments in growth areas and people.

Management Comments

• "We believe artificial intelligence (AI) is playing a critical role in the transformation of how people live and work, and customers are beginning to recognize the benefits in security, speed and cost."
• "We are focused on driving further growth, recurring revenue and investment in strategic areas and believe we are well positioned to lead the future of work with our competitive product lineup and enhanced portfolio of hybrid systems, remote-computing solutions, and intelligent print solutions."
• "We continue to experience challenges that are representative of the trends and uncertainties that may affect our industry, generally, and our business and financial results, specifically, and we expect these challenges to continue in the short-term."
• "Our Fiscal 2023 Plan... exceeded our overall program savings target."
• "We expect to invest some of the savings [from Fiscal 2026 Plan] into our growth areas and our people."
• "We anticipate commodity cost pressure to continue, including recent inflationary trends in memory and storage costs and potential supply constraints in our Personal Systems business."

Industry Context

The technology industry is undergoing significant transformation driven by artificial intelligence, with HP actively integrating AI capabilities into its personal computing and printing portfolios to meet evolving customer needs and enhance performance. The market is characterized by intense competition from both established global players and rapidly growing firms, short product life cycles, and continuous innovation. Macroeconomic headwinds, including inflation, interest rate volatility, and geopolitical tensions, are impacting global demand and supply chains, leading to cautious consumer and commercial spending. There's a notable industry shift towards subscription-based solutions and recurring revenue models, which HP is pursuing with offerings like Device-as-a-Service and Instant Ink. The printing market specifically faces secular declines due to increased digitization and competition from lower-cost non-original supplies, prompting HP to focus on higher-margin big tank printers and digital printing solutions.

Comparison to Industry Standards

• HP competes in Personal Systems with major players such as Acer Inc., Apple Inc., ASUSTeK Computer Inc., Dell Inc., Huawei Technologies Co., Ltd., Lenovo Group Limited, Logitech International S.A., Microsoft Corporation, Samsung Electronics Co., Ltd., and Toshiba Corporation.
• In the Printing market, HP's primary competitors include Brother Industries, Ltd., Canon Inc., Pantum International Limited, Seiko Epson Corporation, The Ricoh Company Ltd., and Xerox Corporation Ltd., alongside independent suppliers of non-original supplies.
• HP highlights its competitive advantages through a broad product portfolio, innovation, R&D capabilities (including security features), design work, brand strength, procurement leverage, cross-selling opportunities, extensive service and support, product accessibility, and a broad-based distribution strategy.
• The company notes that its big tank printers, while having higher initial margins, may result in lower overall device lifetime profitability compared to traditional ink cartridge printers due to the absence of high-margin follow-on cartridge sales, reflecting a shift in industry revenue dynamics.
• HP's focus on AI PCs and workstations with local AI processing capabilities positions it to compete in the emerging AI-driven computing market, aiming for enhanced performance and features against industry peers also integrating AI.

Management Changes

Corporate Governance

Legal Proceedings

• **Copyright Levies**: Ongoing proceedings in certain European countries challenging the imposition or modification of levies on IT equipment (PCs, printers) or restrictions on business user exemptions. HP has accrued amounts believed adequate.
• **India Directorate of Revenue Intelligence Proceedings**: Ongoing appeals before the Customs, Excise and Service Tax Appellate Tribunal regarding alleged underpayment of customs duties (approximately $370 million plus penalties and interest) by HP India. Hewlett Packard Enterprise has agreed to indemnify HP in part.
• **Media Content Protection LLC Patent Litigation (formerly Philips Patent Litigation)**: Federal court case in Delaware alleging infringement of four patents by HP's digital video-capable devices. The district court ruled all asserted patents invalid under 35 U.S.C. § 101, subject to appeal.
• **York County on behalf of the County of York Retirement Fund v. HP Inc., et al. (Securities Class Action)**: A putative class action alleging violations of Sections 10(b) and 20(a) of the Exchange Act. A proposed settlement was preliminarily approved on September 22, 2025.
• **Legal Proceedings re Authentication of Supplies (Dynamic Security)**: Civil litigation and government investigations in multiple geographies (US, Italy, Israel, Netherlands, Australia, New Zealand) regarding supplies authentication protocols in HP printers. A Dutch court of appeal rejected competition claims against HP on November 19, 2024. A putative class action in Illinois was dismissed on September 30, 2025, with leave to amend.
• **Autonomy-Related Legal Proceedings**: U.K. High Court of Justice civil proceedings against former Autonomy management for breach of fiduciary duties. The court ruled on July 22, 2025, that the Lynch estate owed approximately 740 million pounds. HP and Hewlett Packard Enterprise will share equally in any recovery.
• **Litigation with Wilus Institute of Standards and Technology, Inc. and Sisvel International S.A.**: Three patent infringement lawsuits against HP in the Eastern District of Texas regarding Wi-Fi 6 compliant products. In October 2025, Sisvel and HP reached an agreement to resolve all patent litigation related to Wi-Fi 6.
• **Litigation with Koniklijke Philips N.V. and Huawei Technologies Co. Ltd**: Separate lawsuits filed in Munich, Germany, asserting Wi-Fi 6 pool patents, seeking injunctions, damages, and product recall. These are likely covered by the October 2025 Sisvel settlement.
• **Environmental**: HP is, and may become a party to, proceedings brought by governmental entities or private third parties under federal, state, local, or foreign environmental laws, and is conducting environmental investigations or remediation at several current or former operating sites.

Related Party Transactions

• The separation and distribution agreement with Hewlett Packard Enterprise provides for cross-indemnities between HP and Hewlett Packard Enterprise for liabilities allocated to the respective party, including for certain litigation matters.

Stakeholder Impact

• **Shareholders**: Impacted by the decline in net earnings and diluted EPS, ongoing share repurchase program ($8.4 billion remaining authorization), and consistent dividend payments ($1.1 billion in FY25). Potential for recovery from Autonomy litigation (shared with HPE).
• **Employees**: Affected by the Fiscal 2026 Plan, which includes an expected workforce reduction of 4,000 to 6,000 employees. Benefit from stock-based compensation plans and talent development initiatives. Management changes in key executive roles.
• **Customers**: Benefit from new AI PCs and intelligent print solutions. May be impacted by competitive pricing, potential supply constraints, and issues related to non-original printer supplies. Services offerings like Device-as-a-Service aim to enhance customer experience.
• **Suppliers**: HP's heavy reliance on third-party suppliers means their financial health and ability to deliver components are critical. Supplier finance programs provide liquidity to certain partners. Changes in supply chain strategy (e.g., diversification) could impact relationships.
• **Creditors**: Affected by HP's debt levels ($9.666 billion total debt), credit ratings, and capital structure management. The $1.0 billion senior unsecured notes offering in April 2025 and the $5.0 billion revolving credit facility are key aspects of debt management.
• **Regulatory Bodies**: Involved in various legal and regulatory proceedings, including tax audits, environmental compliance, and emerging regulations concerning AI and data privacy. Compliance with these evolving requirements can incur significant costs.

Next Steps

• Implement the Fiscal 2026 Plan through fiscal year 2028, focusing on AI adoption, customer satisfaction, product innovation, and productivity.
• Execute workforce reductions of approximately 4,000 to 6,000 employees as part of the Fiscal 2026 Plan.
• Continue to evaluate and implement mitigating actions for tariffs and commodity costs as the environment evolves.
• Medicare-eligible retirees will transition to receiving a capped subsidy and enrolling in individual market options through an exchange effective January 1, 2026.
• Expect to contribute approximately $43 million to non-U.S. pension plans, $31 million to U.S. non-qualified plan participants, and $3 million to post-retirement benefit plans in fiscal year 2026.
• Anticipate making future cash payments of approximately $0.2 billion in fiscal year 2026 related to restructuring plans.
• Alex Cho's Rule 10b5-1 plan for stock sales is scheduled to commence on December 8, 2025, and expire on December 11, 2025.
• Adopt FASB guidance on disaggregation of specific expense categories for the annual period ending October 31, 2028, and FASB guidance on income tax disclosures for the annual period ending October 31, 2026.
• Continue to address ongoing legal proceedings, including appeals and scheduled hearings in various patent and class action lawsuits.

Key Dates

Recommendation

HP Inc.'s fiscal year 2025 results present a mixed picture. While the Personal Systems segment demonstrated solid revenue growth, driven by a Windows-based PC refresh cycle and strategic focus on AI, the overall profitability declined with lower net earnings and diluted EPS. The Printing segment continues to face secular challenges, including declining supplies revenue and intense competition. The company's proactive steps, such as the new Fiscal 2026 Plan focused on AI adoption and cost savings, are positive for long-term strategic positioning. However, the macroeconomic headwinds, ongoing commodity cost pressures, and the execution risks associated with a significant restructuring plan warrant a cautious approach. The company's commitment to shareholder returns through dividends and share repurchases is a supportive factor. Investors should 'hold' to observe the successful implementation of the Fiscal 2026 Plan and the company's ability to translate its AI investments into sustainable profit growth amidst a challenging market.

Keywords

HP Inc., HPQ, Annual Report, 10-K, Fiscal Year 2025, Personal Systems, Printing, AI PCs, Workstations, Printers, Supplies, 3D Printing, Hybrid Work, Cybersecurity, Financial Performance, Revenue, Earnings, Cash Flow, Restructuring, Share Repurchase, Dividends, Intellectual Property, Supply Chain, Macroeconomic Risks, Corporate Governance, SEC Filing