HP Inc. HPQ shares fell 3.9% during Thursday’s extended trading session after the personal computer (PC) maker reported lower-than-expected bottom-line results for first-quarter fiscal 2025 and issued a profit outlook for the second quarter that fell short of the Zacks Consensus Estimate.

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HP reported first-quarter non-GAAP earnings of 74 cents per share, missing the consensus mark by a penny. The bottom-line result declined 9% from the year-ago quarter’s earnings of 81 cents, mainly due to higher expenses, which more than offset the benefit of higher revenues.

In the trailing four quarters, HP’s earnings surpassed the Zacks Consensus Estimate once while missing the same on three occasions, the average negative surprise being 1.16%.

HP Inc. Price, Consensus and EPS Surprise

HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote

HPQ’s revenues increased 2.4% year over year to $13.5 billion and were in line with the Zacks Consensus Estimate. The year-over-year growth was primarily driven by higher Personal Systems (PS) sales, which more than offset the negative impact of lower revenues in the Printing business.

HPQ’s Q1 Top-Line Details

PS revenues (68.1% of net revenues) came in at $9.2 billion, which improved 5% from the year-ago quarter’s figure (5% up at constant currency or cc). The upside in this division was mainly driven by revenue growth from commercial unit performance and market share gains in Personal Systems.

HP’s total PC units sold were down 1% on a year-over-year basis, mainly due to an 11% decrease in Consumer PS shipments, partially offset by an increase of 6% in Commercial PS shipments. Revenues from the Commercial PS segment increased 10% year over year, while the Consumer PS segment sales declined 7%.

The Printing business’ revenues (31.9% of net revenues) decreased 2% year over year (down 1% at cc) to $4.45 billion. Weakness in the Commercial Printing business and Supplies led to an overall decline in the segment revenues.

Consumer Printing net revenues improved 5%, while Commercial Printing net revenues declined 7%. Supplies net revenues were down 1% (flat in cc) year over year. Total hardware units increased 5%, with Consumer Printing units up 7% and Commercial Printing units flat.

The company witnessed growth across all regions. On a constant currency basis, the Americas rose 3%, the EMEA region witnessed growth of 2% and the Asia Pacific and Japan revenues increased 5% year over year.

Operating Results of HP

Segment-wise, PS’ non-GAAP operating margin contracted 60 basis points (bps) to 5.5%. The Printing division’s non-GAAP operating margin contracted 90 bps to 19%.

HP’s overall non-GAAP operating margin from continuing operations of 9.6% contracted 80 bps year over year. The lower margin was mainly due to the negative impacts of higher commodity costs and increased investments in strategic initiatives.

HPQ’s Balance Sheet and Cash Flow

HP ended the fiscal first quarter with cash, cash equivalents and restricted cash of $2.89 billion, down from $3.25 billion at the end of the previous quarter.

During the quarter, HPQ generated $374 million worth of cash from operational activities and $70 million in free cash flow. It returned $373 million to its shareholders in the form of share repurchases and cash dividends.

HP’s Q2 and FY25 Guidance Update

For the second quarter of fiscal 2025, the company estimates non-GAAP EPS between 75 cents and 85 cents (midpoint 80 cents). The Zacks Consensus Estimate is pegged at 85 cents.

The company raised its bottom-line guidance for fiscal 2025. For the fiscal, it now expects non-GAAP EPS between $3.45 and $3.75 (midpoint $3.60), up from the previous range of $3.06-$3.36. The Zacks Consensus Estimate is pegged at $3.57 per share.

HPQ still expects its free cash flow in the range of $3.2-$3.6 billion for fiscal 2025.

HP’s Zacks Rank & Other Stocks to Consider

HPQ currently carries a Zacks Rank #2 (Buy).

Atlassian TEAM, CyberArk CYBR and Fortinet FTNT are some other stocks that investors can consider in the broader Zacks Computer and Technology sector. TEAM, ZS and FTNT carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atlassian shares have soared 35.4% in the past year. The Zacks Consensus Estimate for TEAM’s fiscal 2025 earnings is pegged at $3.44 per share, indicating a 17.4% year-over-year increase.

CyberArk shares have gained 35.5% in the past year. The Zacks Consensus Estimate for CYBR’s 2025 bottom line is pinned at earnings of $3.64 per share, indicating a year-over-year decline of 20.1%.

Fortinet shares have gained 54.1% in the past year. The Zacks Consensus Estimate for FTNT’s full-year 2025 earnings is pegged at $2.43 per share, suggesting a year-over-year increase of 2.5%.

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