HP Inc. (NYSE: HPQ) ends FY25 with top-line recovery but margin erosion signals AI transition cost

HP Inc. reported financial results for the fourth quarter and full fiscal year 2025 that highlighted a revenue rebound driven by the Personal Systems segment, but also underscored margin pressures and earnings erosion amid structural shifts. Net revenue for the year rose 3.2 percent to 55.3 billion dollars, signaling modest recovery after a flat 2024. However, net earnings fell to 2.5 billion dollars, down 9 percent year-on-year, while GAAP diluted earnings per share declined to 2.65 dollars from 2.81 dollars in fiscal 2024. On a non-GAAP basis, EPS stood at 3.12 dollars, down from 3.43 dollars in the prior period.

For the fourth quarter ended October 31, 2025, HP Inc. delivered net revenue of 14.6 billion dollars, up 4.2 percent compared to the same quarter last year. This marked the sixth consecutive quarter of top-line growth for the global PC and printing technology company. Nevertheless, quarterly GAAP diluted EPS declined 9.7 percent year-on-year to 0.84 dollars. Non-GAAP EPS came in at 0.93 dollars, compared to 0.96 dollars a year ago. Both GAAP and non-GAAP figures landed within the company’s prior guidance ranges.

How HP Inc.’s segment-level performance shows strength in Personal Systems but weakness in Printing

The strong performance in the Personal Systems business provided the primary growth engine during the quarter. Segment revenue rose 8 percent year-on-year to 10.4 billion dollars. This included a 10 percent increase in Consumer Personal Systems revenue and a 7 percent rise in Commercial Personal Systems. Total unit sales climbed 7 percent, with consumer and commercial categories registering 8 percent and 7 percent gains respectively. Despite margin pressure across the business, Personal Systems posted a quarterly operating margin of 5.8 percent.

In contrast, Printing revenue fell 4 percent year-on-year to 4.3 billion dollars. The segment struggled with declining demand across both consumer and commercial categories. Consumer Printing revenue declined by 9 percent, while Commercial Printing fell by 4 percent. Revenue from Supplies also dropped by 4 percent. Total hardware units sold across the segment fell by 12 percent. Operating margin in the Printing division came in at 18.9 percent, compared to 19.6 percent in the same quarter last year.

Over the full year, Personal Systems revenue rose 6 percent to 38.5 billion dollars. This included 8 percent growth in Commercial Personal Systems and 4 percent growth in Consumer Personal Systems. The Printing segment, however, saw its revenue decline 4 percent to 16.7 billion dollars, driven by broad-based declines in hardware and supplies. Full-year operating margin for Personal Systems stood at 5.3 percent, down from 6.2 percent in the prior year, while Printing margins dipped slightly to 18.7 percent from 19.0 percent.

What HP Inc.’s FY25 cash flow performance reveals about capital discipline and return strategy

HP Inc. reported 3.7 billion dollars in net cash provided by operating activities during fiscal 2025, roughly flat compared to the previous year. Free cash flow for the full year came in at 2.9 billion dollars, down from 3.3 billion dollars in fiscal 2024. This figure reflected net investments in leases, capital expenditures, and purchased intangibles totaling just over 1 billion dollars.

Despite this decline, HP Inc. returned 1.9 billion dollars to shareholders, demonstrating its continued focus on capital return. This included 850 million dollars in share repurchases and 1.1 billion dollars in dividend payments. In the fourth quarter alone, the company repurchased approximately 18.3 million shares for 500 million dollars and paid out 270 million dollars in dividends. HP Inc. exited the year with 3.7 billion dollars in gross cash and maintained total current assets of 22.5 billion dollars, with a net stockholders’ deficit improving to negative 346 million dollars from negative 1.3 billion dollars in the prior year.

HP Inc.’s quarterly dividend was raised to 0.30 dollars per share, with the next payment scheduled for January 2, 2026. This marks the company’s first dividend distribution for fiscal 2026 and indicates ongoing confidence in its cash position and shareholder priorities.

What the FY26 guidance and restructuring plan reveal about HP Inc.’s strategic direction

For the first quarter of fiscal 2026, HP Inc. is guiding GAAP diluted EPS in the range of 0.58 to 0.66 dollars, and non-GAAP EPS between 0.73 and 0.81 dollars. For the full fiscal year, the company projects GAAP EPS of 2.47 to 2.77 dollars and non-GAAP EPS of 2.90 to 3.20 dollars. HP Inc. expects to generate between 2.8 and 3.0 billion dollars in free cash flow during the year.

In conjunction with the earnings release, HP Inc. announced a multiyear company-wide initiative that aims to enhance customer satisfaction, boost productivity, and accelerate AI-enabled product innovation. This fiscal 2026 transformation plan is expected to deliver gross run-rate cost savings of approximately 1 billion dollars by the end of fiscal 2028. To implement the plan, HP Inc. will incur approximately 650 million dollars in total restructuring charges, including 250 million dollars in fiscal 2026. The company expects to reduce its global workforce by 4,000 to 6,000 employees by the end of the restructuring period.

This marks HP Inc.’s most significant structural overhaul since its fiscal 2023 plan, and reflects a broader pivot toward digital transformation, platform simplification, and AI integration. Key focus areas in the restructuring plan include device lifecycle services, AI PCs, and subscription-based offerings. Executives stated that the investments made today are intended to yield sustainable cost savings and product momentum over the long term.

What top executives at HP Inc. are saying about growth strategy and AI adoption in FY26

Enrique Lores, President and Chief Executive Officer of HP Inc., said the company’s financial performance reinforces the strength of its portfolio and the execution capabilities of its team. He pointed to the consistent quarterly revenue growth and described fiscal 2025 as a foundational year for repositioning HP Inc. to lead in the “Future of Work,” particularly in AI-driven hardware and hybrid workplace solutions. He emphasized that the focus for fiscal 2026 will be disciplined execution as the company brings new AI-powered devices and services to market.

Chief Financial Officer Karen Parkhill added that while fiscal 2025 was shaped by both operational improvement and macroeconomic challenges, HP Inc. delivered strong results in the second half of the year. She reiterated the company’s commitment to mitigating cost headwinds and said HP Inc. will continue to allocate capital toward AI-centric product innovation, customer experience improvements, and internal productivity tools.

How investors are responding to HP Inc.’s FY25 results and FY26 guidance

Investor response to HP Inc.’s fourth quarter and full-year results has been mixed. While the topline recovery and raised dividend are likely to be seen as signals of management confidence, the shrinking margins and lowered full-year earnings per share suggest that cost pressures and market headwinds will continue into fiscal 2026. The broader restructuring plan, with its focus on long-term efficiency and artificial intelligence integration, could boost institutional sentiment if execution remains on track.

Some institutional investors may view the updated FY26 outlook as conservative, particularly given the EPS decline and expected restructuring costs. However, long-only funds and income-focused investors are likely to appreciate the continued dividend commitment and the disciplined capital returns policy, which returned two-thirds of FY25 free cash flow to shareholders. Analysts tracking the stock noted that HP Inc.’s share price remained relatively stable in the days following the earnings release, with valuation multiples supported by ongoing buybacks and predictable cash flow.

What are the most important insights from HP Inc.’s Q4 and FY25 results?

The fiscal 2025 earnings season for HP Inc. presents a picture of strategic repositioning rather than near-term earnings strength. While the company saw year-on-year revenue growth and solid performance in its Personal Systems division, earnings per share declined due to higher costs, margin compression, and macro uncertainty. With a newly launched restructuring program targeting 1 billion dollars in savings by fiscal 2028, HP Inc. is signaling a multiyear transition into AI-first product strategy and operational streamlining. Fiscal 2026 will be a critical year to assess whether these investments deliver the intended financial and shareholder returns.

What are the key takeaways from HP Inc.’s Q4 and full-year FY25 earnings results?

• HP Inc. reported full-year fiscal 2025 revenue of 55.3 billion dollars, up 3.2 percent year-on-year, led by growth in the Personal Systems segment.

• GAAP diluted EPS for FY25 fell to 2.65 dollars, a 5.7 percent decline from the prior year, while non-GAAP EPS dropped 9 percent to 3.12 dollars.

• In the fourth quarter, HP Inc. posted 14.6 billion dollars in revenue, a 4.2 percent increase, but Q4 GAAP EPS dropped to 0.84 dollars, down 9.7 percent from Q4 FY24.

• Personal Systems revenue grew 8 percent year-on-year in Q4 to 10.4 billion dollars, while Printing revenue declined 4 percent to 4.3 billion dollars.

• HP Inc. generated 2.9 billion dollars in free cash flow during FY25 and returned 1.9 billion dollars to shareholders through dividends and buybacks.

• The quarterly dividend was increased to 0.30 dollars per share, reflecting management’s confidence in long-term capital returns.

• A new restructuring plan was announced with a target of 1 billion dollars in cost savings by FY28 and 4,000 to 6,000 global job reductions.

• FY26 guidance includes GAAP EPS between 2.47 and 2.77 dollars and non-GAAP EPS between 2.90 and 3.20 dollars, with free cash flow projected at up to 3.0 billion dollars.

• Executives emphasized a pivot toward AI-powered devices, hybrid workforce enablement, and digital subscriptions as strategic focus areas for growth.

• Investor sentiment remains cautious, with analysts watching for execution risks around the restructuring program, printing margins, and AI monetization roadmap.