HP Inc. (HPQ) is wasting no time preparing for the impact of President Trump's tariffs on its business this year.

The computer and printer giant said Thursday evening that its full-year profit outlook now reflects the added cost of US tariff increases on China. HP didn't slash its guidance because it found new cost savings to help offset the higher expenses.

HP added that by the end of its current fiscal year, more than 90% of its products sold in North America will be built outside of China.

HP CEO Enrique Lores said that price increases on products are a last resort, but some targeted increases are assumed. 

Indeed, all eyes are on artificial intelligence PC demand and tariffs for HP in 2025.

President Trump said Wednesday he will proceed with an additional 10% tariff on Chinese goods starting March 4, doubling the existing 10% across-the-board tariff that went into effect on Feb. 10. These tariffs will be added to the 10% to 25% duties that Trump imposed on more than $300 billion of products from China in his first term as president, which mostly remain intact.

Trump added that the 25% tariffs on imports from Mexico and Canada that have been paused since Feb. 3 would also kick in on March 4.

Read more: What are tariffs, and how do they affect you?

The Consumer Technology Association recently estimated that proposed tariffs from the Trump administration could increase laptop and tablet prices by as much as 46%. Smartphones could see a 26% price increase. 

Taiwan-based PC maker Acer said earlier this month it would increase prices on products to the US by 10% due to the tariffs.

HP sells its products in China and relies on the country for key component sourcing. If higher tariffs go into effect, it could raise material costs and force HP to raise consumer prices.

"We anticipate that the bigger driver of the share price will be the investor sentiment around the likelihood of a PC recovery materializing in 2025, particularly driven by first quarter results as well as managements' confidence in the pace of the refresh starting the year," JPMorgan analyst Samik Chatterjee wrote in a client note.

"Importantly, while recent discussions with ODMs [original device manufacturers] and channel partners would suggest some optimism around the building PC momentum, particularly related to the upcoming new product cycle as well as with the Win 10 end of life refresh, we believe potentially offsetting headwinds in relation to [foreign exchange], tariffs (and the pull-in of demand), and potential federal cost cuts are on top of investor minds and have limited the year to date share price performance," Chatterjee added.

REUTERS / Reuters

Earnings analysis: Mixed sales by major product line

Here's what HP Inc. reported for the first quarter of fiscal year 2025, compared to Wall Street estimates compiled by Bloomberg:

• Net sales: $13.5 billion (+2.4% year over year) vs. $13.38 billion estimate

• Personal systems sales: $9.2 billion (+5% year over year) vs. $9.13 billion estimate

  • Consumer personal system sales: -7%

  • Commercial personal system sales: +10%

• Printing sales: $4.3 billion -2% year over year) vs. $4.26 billion estimate

  • Consumer printing sales: +5%

  • Commercial printing sales: -7%

• Diluted earnings per share (EPS): $0.74 (-8.6% year over year) vs. $0.74 estimate (guidance: $0.70-$0.76)

What else caught our attention: Soft Q2 earnings guidance

• Weak margins: Quarterly operating margins dropped to 9.6% from 10.4% a year ago.

  • Personal systems operating margins fell to 5.5% from 6.1% a year ago.

  • Printing operating margins fell to 19% from 19.9% a year ago.

• Fiscal second quarter EPS guidance: $0.75 to $0.85 vs. $0.85 estimate

• Full-year EPS guidance: $3.45 to $3.75 vs. $3.59 estimate (prior guidance: $3.45 to $3.75)

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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