HPQ Set to Report Q3 Earnings: What's in Store for the Stock?

HP Inc. (HPQ) is scheduled to release its Q3 FY25 results on August 27, with consensus estimates projecting revenues of $13.96 billion (+3.3% YoY) and non-GAAP EPS of 75 cents (-9.6% YoY). While the Personal Systems segment is expected to drive top-line growth, particularly from AI PCs and gaming, with sales estimated up 6.7% to $9.99 billion, the Printing division is anticipated to decline 4.6% to $3.95 billion due to soft consumer demand. Broader macroeconomic challenges, including high interest rates and delayed enterprise IT spending, pose headwinds, and the company has historically missed EPS estimates, with the Zacks model not conclusively predicting a beat for this quarter.

Analysis

HP Inc. is approaching its third-quarter fiscal 2025 earnings with a mixed outlook, characterized by projected top-line growth against bottom-line contraction. Consensus estimates point to a 3.3% year-over-year revenue increase to $13.96 billion, but a significant 9.6% decline in non-GAAP EPS to 75 cents. This performance is expected to be bifurcated by segment: the Personal Systems division is forecast to grow 6.7% to $9.99 billion, fueled by momentum in the AI PC category, a Windows 11 refresh cycle, and new gaming hardware. Conversely, the Printing division is anticipated to shrink by 4.6% to $3.95 billion, largely due to softened consumer demand in China. Overarching macroeconomic pressures, including high interest rates impacting consumer PC demand and postponed enterprise IT spending, present significant headwinds. Compounding the uncertainty is HPQ's history of missing EPS estimates in each of the last four quarters, averaging a 4.3% negative surprise, and a neutral Zacks Earnings ESP of 0.00%, which suggests an earnings beat is not statistically likely.

Key Decisions for Investors

• Investors should closely scrutinize the segmental results to confirm if the forecasted 6.7% growth in Personal Systems, driven by new AI PC and gaming products, can sufficiently offset the projected 4.6% decline in the Printing division and drive margin improvement.
• Given the conflicting signals of revenue growth and earnings decline amid macroeconomic pressures, the company's forward guidance for Q4 will be more critical than the Q3 results for determining the stock's trajectory.
• Considering the historical trend of four consecutive negative earnings surprises and the model's neutral prediction (0.00% ESP), a cautious stance may be warranted as the stock is vulnerable to a negative reaction if it fails to meet the lowered EPS expectations.