HP Inc. has successfully navigated a dynamic market landscape in Q3 FY2025, delivering solid financial results propelled by a strong performance in personal systems. The company witnessed a notable 3% year-over-year revenue increase, largely attributed to the sustained momentum of Windows 11 adoption and the burgeoning demand for AI PCs. This growth, coupled with strategic actions to counteract rising trade-related costs, underscores HP's agility and disciplined execution. While the print division faced challenges from a competitive pricing environment and a softer office market, HP maintained its focus on profitability and strategic growth areas. The company's commitment to achieving $2 billion in annualized gross savings by the close of fiscal year 2025 further strengthens its financial posture, enabling continued investment in innovation and market leadership.
The personal systems segment emerged as a key growth driver, with a 6% increase in revenue. This was significantly bolstered by the accelerating adoption of AI PCs, which now comprise over 25% of HP's product mix, exceeding initial projections. The strategic shift towards higher-value segments, including AI PCs and premium commercial and consumer offerings, has been instrumental in this success. HP's leadership noted that AI PCs command a higher Average Selling Price (ASP), reinforcing the value of this segment. Concurrently, the Windows 11 refresh cycle continues to fuel commercial demand, indicating sustained market momentum. The company has also made substantial progress in diversifying its manufacturing base outside China, with nearly all products sold in North America now produced elsewhere, effectively mitigating trade-related tariffs.
Conversely, the print business experienced a 3% decline in constant currency revenue. This was influenced by a more aggressive pricing environment and a slight dip in office segment demand, particularly in North America and Europe. Despite these headwinds, HP emphasized its commitment to maintaining profitability within the print division through disciplined cost management, prioritizing profitable unit placements, and focusing on growth in consumer subscriptions and industrial graphics. The company reiterated that while hardware sales might fluctuate, the underlying demand for printed pages remains consistent, suggesting a long-term recovery for the print segment as businesses eventually upgrade their infrastructure.
Looking ahead, HP remains optimistic about the PC market's trajectory, anticipating mid-single-digit growth in the second half of the fiscal year, driven by the persistent Windows 11 refresh and AI PC adoption. The company projects this positive momentum to extend into fiscal year 2026. For the print market, a low single-digit decline is expected for fiscal years 2025 and 2026, yet HP's strategy aims to preserve the segment's operating profit contribution. HP's capital allocation strategy prioritizes returning free cash flow to shareholders, with expectations for increased share repurchase activity as leverage ratios improve. The company's proactive measures in managing external pressures, coupled with its focus on internal efficiencies and innovative product development, position it favorably for sustained growth and market leadership in the evolving technology landscape.