In a recent earnings report, HP Inc. (HPQ) fell short of expectations, but CEO Enrique Lores is optimistic about the company’s future performance. Lores shared with Yahoo Finance that HP will be implementing aggressive cost-cutting measures, particularly in the printing business, to boost profits. This initiative is part of a $1.6 billion plan that was put into motion nearly a year ago.
While HP’s fiscal third-quarter sales showed mixed results, with consumer PC sales dropping by 1% and commercial sales increasing by 8%, overall PC division sales rose by 5%. The surge in commercial sales can be attributed to businesses upgrading their computers in anticipation of Microsoft ending support for Windows 10 in October 2025.
On a global scale, traditional PC shipments saw a 3% year-over-year increase in the second quarter, marking the second consecutive quarter of growth after eight quarters of decline. However, China was identified as a weak spot by IDC, a market research firm specializing in technology.
Despite these positive trends in the PC market, HP continues to face challenges in its printing business. Sales in this segment dropped by 3% year over year, with consumer printing sales up by only 2% and commercial printing sales decreasing by 5%. Operating margins for the printing segment declined to 17.3% from 19% the previous year, impacting the company’s earnings performance.
Following HP’s earnings report, Xerox (XRX), a key competitor in the printing industry, also reported weak earnings and provided cautious guidance. Analysts noted that demand for laser and inkjet printers remains subdued, particularly in regions like China and Europe. This trend has negatively impacted HP’s home printing and supplies business, compounded by aggressive pricing strategies from competitors taking advantage of currency fluctuations.
Key Earnings Metrics for HP Inc.:
– Net Sales: $13.5 billion (+2.4% year over year) vs. $13.37 billion estimate
– Personal Systems Sales: $9.4 billion (+5% year over year) vs. $9.1 billion estimate
– Printing Sales: $4.1 billion (-3% year over year) vs. $4.25 billion estimate
– Diluted EPS: $0.83 (-3% year over year) vs. $0.86 estimate (guidance: $0.78-$0.92)
As HP navigates challenges in the printing business and capitalizes on growth opportunities in the PC market, investors will be watching closely to see how the company’s strategic cost-cutting measures and product innovations drive future financial performance.
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