Q4 2024 Earnings Summary
- HP expects AI PCs to make up approximately 25% of its PC unit shipments in FY '25, benefiting from increased demand driven by AI and Windows 11 refresh cycles, which should contribute to both unit growth and higher average selling prices.
- HP has achieved roughly 80% of its $1.6 billion annualized gross run rate savings target with one year remaining in its Future Ready cost-saving plan, positioning the company to grow both revenue and operating profit in FY '25.
- HP has strengthened its supply chain resilience by building factories in different parts of the world, making it well-positioned to mitigate potential impacts from tariffs and geopolitical uncertainties, giving it a competitive advantage over others in the industry.
- HP expects its free cash flow to grow only roughly in line with earnings in fiscal year 2025, despite cost optimizations and anticipated PC market growth, raising concerns about limited improvement in cash generation.
- Potential tariffs and geopolitical uncertainties pose risks to HP's supply chain, with management acknowledging it's "hard to know what exactly the new tariffs are going to be", indicating potential negative impacts on operations and margins.
- HP's print operating margins may face pressure as management aims to "lean in" by placing more hardware units, which "may put some pressure on the margin in a specific quarter", suggesting possible margin compression in the future.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +2% | Stronger Personal Systems performance (notably in commercial) and improved pricing drove revenue gains, but softness in Printing and competitive pressures tempered overall growth. Looking ahead, continued focus on premium products and market share gains may sustain upward momentum. |
Commercial Personal Systems | +6% | Robust enterprise demand and disciplined pricing supported a rise in unit volumes, offsetting headwinds from currency fluctuations. Forward-looking initiatives in premium and AI-enabled PCs could further boost margins despite ongoing competition. |
Consumer Printing | -39% | Aggressive pricing competition, weaker consumer demand, and structural declines in home printing contributed to the steep drop. Increased emphasis on subscription services and value-added solutions may help mitigate future declines as the market shifts. |
Commercial Printing | +19% | Recovery in enterprise spending, higher hardware volume, and favorable mix in parts of EMEA and the Americas spurred growth. However, slower China market recovery and persistent competition remain challenges that could affect sustaining this momentum. |
Net Income | -7% | Cost pressures (including restructuring and interest expenses) and slower Print segment recovery eroded margins despite revenue growth. Going forward, ongoing transformation efforts and shift toward higher-margin products aim to support profitability. |
Net Change in Cash | -75% | Lower operating cash flow—due to working capital movements and share repurchases—reduced the cash balance compared to last year. Over the long term, improved inventory management and disciplined capital allocation could stabilize cash generation. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Non-GAAP EPS | Q4 2024 | $0.89 to $0.99 | — | N/A |
GAAP EPS | Q4 2024 | $0.74 to $0.84 | — | N/A |
Personal Systems Revenue | Q4 2024 | Sequential increase by low to mid single digits | — | N/A |
Print Revenue | Q4 2024 | Sequential increase by low to mid single digits | — | N/A |
Print Margins | Q4 2024 | Near top of 16% to 19% target range | — | N/A |
Non-GAAP EPS | Q1 2025 | — | $0.70 to $0.76 | no prior guidance |
GAAP EPS | Q1 2025 | — | $0.57 to $0.63 | no prior guidance |
Non-GAAP EPS | FY 2024 | $3.35 to $3.45 | — | N/A |
GAAP EPS | FY 2024 | $2.62 to $2.72 | — | N/A |
Free Cash Flow | FY 2024 | $3.1B to $3.6B (incl. $300M restructuring outflows) | — | N/A |
Supplies Revenue | FY 2024 | Decline by low single digits | — | N/A |
Non-GAAP EPS | FY 2025 | — | $3.45 to $3.75 | no prior guidance |
GAAP EPS | FY 2025 | — | $3.06 to $3.36 | no prior guidance |
Free Cash Flow | FY 2025 | — | $3.2B to $3.6B | no prior guidance |
Revenue Growth | FY 2025 | — | Expected year-over-year growth, with strength in Personal | no prior guidance |
Systems offset by a likely decline in Print | ||||
Dividend | FY 2025 | — | $1.16 per share | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
GAAP EPS | Q4 2024 | $0.74 to $0.84 | $0.93 | Beat |
GAAP EPS | FY 2024 | $2.62 to $2.72 | $2.83 (sum of Q1–Q4: 0.63+ 0.61+ 0.66+ 0.93) | Beat |
Personal Systems Revenue | Q4 2024 | Increase sequentially by low to mid single digits | $9,591 million(up from $9,369 millionIn Q3 2024) | Met |
Printing Revenue | Q4 2024 | Increase sequentially by low to mid single digits | $4,452 million(up from $4,143 millionIn Q3 2024) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Windows 11 PC refresh cycle | Q3: Commercial recovery driven by aging base and Windows 10 end of support; momentum building. (Q3: ) Q2: Key driver of second-half growth. (Q2: ) Q1: Anticipated to boost second-half FY24. (Q1: ) | Slower ramp vs. past OS cycles but expected to drive significant upgrades in 2025, especially in Commercial PCs. (Q4: ) | Consistent topic each quarter, with deeper impact forecast in 2025. |
AI PC adoption and penetration | Q3: Minimal near-term impact, aiming for 50% of shipments by 2027. (Q3: ) Q2: 10% of shipments in second half, ramping more in 2025/2026. (Q2: ) Q1: 40%-60% penetration within three years, bigger effect in 2025/2026. (Q1: ) | AI PCs at 15% of shipments, projected 25% in FY25 and 40%-60% shortly after, with a 5%-10% ASP boost. (Q4: ) | Recurring theme of growing adoption and revenue uplift from premium AI PCs. |
Print margins and competition from Japan | Q3: 17.3% margin, down YoY due to pricing and China weakness; expected near top of range in Q4. (Q3: ) Q2: 19% margin, stable YoY, competitive pricing from weaker yen. (Q2: ) Q1: 19.9% margin, +1 pt YoY, Japanese rivals aggressive in consumer hardware. (Q1: ) | Print margin at 19.6%, above range, aided by cost actions. No major shift in Japanese competitor behavior, but yen remains a factor. (Q4: ) | Steady margins within 16%-19% target; Japanese competition remains an ongoing pressure. |
Future Ready cost optimization | Q3: Accelerated timeline; aiming for 80% savings by end of FY24. (Q3: ) Q2: On track for 70% by FY24; helps fund AI and workforce investments. (Q2: ) Q1: Launch phase, targeting $1.6B by FY25. (Q1: ) | About 80% of $1.6B savings target achieved, using efficiencies to invest in growth and protect margins. (Q4: ) | Mentioned every quarter, steadily progressing toward cost-savings goal. |
Weak demand in China | Q3: Print hardest hit, unfavorable mix and pricing pressure in China. (Q3: ) Q2: No improvement expected, APJ revenue down. (Q2: ) Q1: Significant drag on Print hardware, partly offset by India. (Q1: ) | Noted softness in consumer PCs and challenges in Print; China remains a tough market. (Q4: ) | Consistent headwind each quarter, no clear sign of near-term recovery. |
Industrial Graphics business momentum | Q3: Fourth straight quarter of revenue growth, aided by drupa momentum. (Q3: ) Q2: Third consecutive quarter of growth; focusing on AI and robotics. (Q2: ) Q1: Growth in hardware/supplies/services, preparing new offerings for drupa. (Q1: ) | Continued strong performance, boosting Print revenue by 1% YoY, expecting momentum to continue. (Q4: ) | Regularly highlighted as a bright spot contributing to Print’s top line. |
Supply chain resilience and geopolitical risks | No mention in Q3, Q2, Q1 | Discussed multi-region manufacturing strategy to mitigate tariffs and geopolitical shifts. (Q4: ) | Newly mentioned in Q4, reflecting proactive planning for possible trade disruptions. |
Tariff concerns | No mention in Q3, Q2, Q1 | Acknowledged potential U.S. tariffs; most production is outside the U.S., and HP feels prepared to adapt. (Q4: ) | New topic in Q4, linked to broader geopolitical contingencies. |
Major future impact from AI PCs & Windows 11 | Q3: Minimal AI PC impact but expected to ramp; Windows 11 fueling Commercial refresh. (Q3: ) Q2: Larger AI PC push in 2025/2026, Windows 11 supporting commercial deals. (Q2: ) Q1: 2024 sees modest start, bigger inflection in 2025. (Q1: ) | Both are seen as key 2025 growth drivers, boosting ASPs and unit demand in Commercial. Windows 11 ramp plus AI PC mix is expected to lift revenue. (Q4: ) | Recurring theme, emphasized as a major catalyst for next year’s results. |
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PC Market Outlook
Q: Will commercial PC growth pick up ahead of Windows 10 end-of-life?
A: Enrique Lores explained that the Windows 10 refresh started slower than previous transitions, making the opportunity in 2025 bigger due to the deadline when support costs will significantly increase. An aged installed base needing refresh and growing AI PC adoption are expected to drive commercial PC growth. -
AI PCs Impact on ASPs and Margins
Q: How will rising AI PC mix affect ASPs and margins?
A: Enrique Lores stated that AI PCs are expected to drive an improvement in average selling prices, with shipments anticipated to be 40% to 60% of the mix in a year, impacting the overall category by 5% to 10%. Karen Parkhill added that higher penetration of AI PCs will enhance premium offerings and benefit ASP growth next year. -
Free Cash Flow Growth Expectations
Q: Why isn't free cash flow expected to be materially higher next year despite cost optimizations?
A: Karen Parkhill said they expect free cash flow to grow roughly in line with earnings. While restructuring charges will decrease, they will be offset by slightly higher capital expenditures to support growth plans. Enrique Lores added that EPS growth is driven by both share buybacks and operating profit growth. -
Commodity Cost Pressures
Q: When will commodity cost pressures ease and benefit margins?
A: Enrique Lores expects commodity cost pressures to continue through the first half of the fiscal year, with mitigation in the second half through repricing and cost actions. Karen Parkhill noted that strategic buys helped initially, and now repricing and cost-down actions are taking time to take hold. -
Impact of Potential Tariffs
Q: How will potential tariffs affect supply chain and operations?
A: Enrique Lores acknowledged they produce most products outside the U.S. and have built a more resilient supply chain over the past three years. They are prepared to respond to final tariff decisions and actively manage their supply chain accordingly. -
Print Margins and Outlook
Q: Why isn't the print operating margin range higher given consistent strong margins?
A: Karen Parkhill stated they expect print operating margins at the high end of the 16% to 19% range to continue in FY '25. Maintaining the lower end of the range provides flexibility to invest where they see opportunities while remaining cognizant of dynamic market conditions. -
Capital Allocation Policy
Q: Will strong print margins lead to changes in capital return policy?
A: Karen Parkhill affirmed that the capital allocation policy remains unchanged, expecting to return approximately 100% of free cash flow over the long term while maintaining a leverage ratio just under 2x. -
Growth Services Outlook
Q: What are the growth expectations for growth services next year?
A: Enrique Lores indicated that growth businesses will continue to outpace the overall company. They expect subscriber growth in consumer services, expansion of offerings like Paper as a Service, and continued growth in Workforce Solutions and hybrid systems as the commercial market recovers.