HP Inc. Fiscal Year 2025 Performance Review and Strategic Outlook for Fiscal Year 2026

 

Introduction: Delivering Growth in a Dynamic Environment

HP Inc. delivered a strong performance in Fiscal Year 2025, successfully navigating a dynamic and challenging external landscape. The successful execution of our "Future of Work" strategy propelled the company to its sixth consecutive quarter of revenue growth, demonstrating both the strength of our portfolio and the resilience of our team. Throughout the year, we responded with agility to a challenging trade environment, driving sequential profit improvement in the second half of the year while investing in supply chain resilience to mitigate future risks.

This briefing provides our stakeholders with a comprehensive review of our solid FY25 results, a detailed look at the strategic initiatives driving our momentum, and a clear-eyed view of our plans and outlook for Fiscal Year 2026. We are accelerating innovation, particularly in AI-powered devices, to enhance productivity, security, and flexibility for our customers, and we are entering the new fiscal year with a disciplined focus on execution to create long-term shareholder value.

We will now turn to a detailed overview of the key financial results that defined our performance in Fiscal Year 2025.

Fiscal Year 2025 Financial Highlights

Our top-line financial metrics serve as key indicators of the company's market position, operational execution, and commitment to creating shareholder value. The results for Fiscal Year 2025 reflect solid performance across these critical measures, validating our strategic focus and disciplined financial management.

FY25 Full-Year Financial Scorecard

Key Financial Metric	FY25 Final Result
Net Revenue	$55.3 billion (+3.2% YoY)
GAAP Diluted Net EPS	$2.65
Non-GAAP Diluted Net EPS	$3.12
Net Cash Provided by Operating Activities	$3.7 billion
Free Cash Flow	$2.9 billion
Capital Returned to Shareholders	$1.9 billion

The full-year results demonstrate solid execution and financial discipline. The 3.2% growth in net revenue to 55.3 billion** marks a return to annual growth, driven by key strategic areas. Furthermore, the generation of **2.9 billion in free cash flow enabled us to return a significant $1.9 billion to shareholders through dividends and share repurchases, underscoring our unwavering commitment to delivering shareholder value.

The following section provides a deeper analysis of the business segments that contributed to these strong results.

Detailed Segment Performance Analysis for FY2025

To fully understand the drivers behind our full-year financial performance, it is essential to dissect the results of our core business units. This section examines the performance of Personal Systems and Printing, revealing the market dynamics and strategic execution that shaped Fiscal Year 2025.

Personal Systems: Capturing Growth and Market Share

The Personal Systems segment delivered strong growth in FY25, reporting total net revenue of $38.5 billion, a 6.5% year-over-year increase, with an operating margin of 5.3%.

This performance was primarily fueled by strength in the commercial sector, where the Windows 11 refresh cycle continues to act as a significant tailwind. We saw accelerating demand for AI-powered devices, with AI PCs representing over 30% of our total shipments in the fourth quarter. This rapid adoption is a clear market validation of our 'Future of Work' strategy, demonstrating strong demand for intelligent devices that enhance productivity at the edge. As a result of our focused strategy and compelling product portfolio, we successfully gained PC market share worldwide, particularly in high-value categories including commercial and consumer premium, as well as workstations.

Printing: Navigating Market Softness with Strategic Focus

The Printing segment navigated a challenging market in FY25, reporting total net revenue of $16.7 billion, representing a 3.7% year-over-year decline. Despite the top-line pressure, the segment maintained a robust operating margin of 18.7%.

The revenue decline reflects overall market softness and delayed purchasing decisions across all regions. However, our strategic focus on key growth areas yielded significant bright spots within the segment, and we successfully maintained our #1 market share position in print.

• Consumer Subscriptions: This area, which includes our popular All-in Plan, delivered double-digit revenue growth and is just under $1 billion in annual revenue.
• Industrial Graphics: Momentum continued with a ninth consecutive quarter of year-over-year growth, exceeding $1.8 billion in annual revenue, driven by strong demand in labels and packaging.

Supplies revenue declined 2% in constant currency for the year, a result in line with our long-term expectations, and we successfully gained market share in this critical category.

The strong performance in high-value Personal Systems, particularly AI PCs, and the growth in subscription services within Printing, directly validate the strategic initiatives we will now detail.

Strategic Execution: Advancing Key Growth Areas and Innovation

Our strategic initiatives are the engine driving our 'Future of Work' vision, with our push into AI-powered solutions delivering the innovative, intelligent tools our customers require. These initiatives, which collectively grew revenue in the double digits year-over-year, are at the forefront of our innovation efforts and are already delivering significant value to our customers and the company.

Pioneering AI-Powered Solutions

HP is making a significant push into AI-powered innovation, creating smarter, more intuitive experiences across our portfolio. Key developments this year include:

• AI Station: We launched the AI Station, a new edge-class device powered by NVIDIA. This powerful workstation brings high-performance AI compute directly to where data is generated, allowing it to run large parameter models from industry leaders like Mixtral and Ollama locally and accelerate development while reducing cloud costs.
• Workforce Experience Platform (WXP): Our WXP solution now manages approximately 2.4 million connected devices and remediates over 12 million IT issues per month. With its new integration with Microsoft Security Co-pilot, we are embedding generative AI directly into IT management for faster, more intelligent responses.
• Smarter Printing: We introduced new AI-driven features that streamline printing and scanning. These enhancements make it easier to print from web pages, reduce unnecessary pages, improve scan quality, and auto-generate file names.

Commitment to Sustainable Impact

Our commitment to creating a positive, lasting impact on the planet, people, and communities is integral to our business. In the fourth quarter, we continued to make meaningful progress:

• Industry Recognition: HP was named "2025 Americas Company of the Year" by Frost & Sullivan for leadership in sustainability and circular business practices. Our HP Renew Solutions also received the "OEM Circular Innovation Award."
• Environmental Milestones: We concluded our participation in the NextWave Plastics consortium by successfully diverting 53,000 tonnes of ocean-bound plastics, doubling our original goal.
• Digital Equity: We expanded our efforts to accelerate digital equity through new partnerships with Access to Success in Canada and eSTEM in Morocco. Additionally, the HP Gaming Garage launched a new course on Blockchain & Cybersecurity to build future-ready skills.

These strategic initiatives are enabled by a disciplined approach to cost management and operational efficiency.

Driving Operational Excellence and a Future-Ready Cost Structure

A rigorous focus on cost discipline and operational efficiency is a core tenet of our strategy, enabling us to self-fund investments in growth and innovation while ensuring profitability. Our transformation programs are designed to create a more agile and efficient cost structure for the future.

Success of the Future Ready Program

We have officially completed our Future Ready Transformation Program, which significantly exceeded its initial objectives. The program delivered 2.2 billion** in gross annualized run-rate savings, surpassing our original target by approximately **800 million. This outperformance provided critical mitigation against macroeconomic headwinds and demonstrated our ability to execute large-scale transformation effectively.

Launching the FY26 AI-Powered Transformation Initiative

Building on the proven success and disciplined execution of the Future Ready program, we are launching a new company-wide initiative designed to leverage artificial intelligence to drive profitable growth and further enhance our operational capabilities. This multi-year plan will embed AI across our operations.

• Strategic Goals: The initiative is designed to Improve Customer Satisfaction, Accelerate Product Innovation, and Boost Productivity.
• Financial Target: We are targeting approximately $1.0 billion in gross run-rate savings by the end of Fiscal Year 2028.
• Associated Costs: The plan is expected to incur an estimated $650 million in restructuring and other charges through FY28.
• Headcount Impact: This transformation will result in a planned reduction of approximately 4,000-6,000 employees globally by the end of FY28.

This forward-looking initiative positions HP to be more agile and competitive, underpinning our financial outlook for the coming year.

Fiscal Year 2026 Outlook: Strategy, Projections, and Headwinds

Our outlook for Fiscal Year 2026 is grounded in a clear strategy to outperform the market, drive growth in our key strategic areas, and proactively manage known headwinds. We are confident in our ability to execute with discipline while navigating a complex macroeconomic environment.

FY2026 Financial Guidance

The following table outlines our financial guidance for the full Fiscal Year 2026 and the first quarter of FY26.

Outlook Period	Metric	GAAP Range	Non-GAAP Range
Full Year FY2026	Diluted Net EPS	$2.47 – $2.77	$2.90 – $3.20
Full Year FY2026	Free Cash Flow	-	$2.8B – $3.0B
Q1 FY2026	Diluted Net EPS	$0.58 - $0.66	$0.73 – $0.81

Navigating Market Headwinds: The Rising Cost of Memory

We are proactively addressing the challenge of accelerating memory costs, which are expected to impact Personal Systems margins, particularly in the second half of FY26. We are executing an aggressive, multi-pronged mitigation strategy to protect margins against these inflationary pressures.

1. Qualify New Suppliers: Actively qualify lower-cost memory suppliers to expand our sourcing base and mitigate cost increases.
2. Optimize Product Design: Redesign key product configurations to reduce memory density where feasible without impacting performance.
3. Accelerate Internal Savings: Fast-track our internal AI-enabled transformation to unlock additional operational efficiencies and cost reductions.
4. Implement Strategic Pricing: Execute disciplined price increases in partnership with our channel and direct customers to offset component cost inflation.

In summary, Fiscal Year 2025 demonstrated our resilience and the success of our core strategies. For Fiscal Year 2026, we are positioned to outperform the market through disciplined execution, leadership in the burgeoning AI PC category, and a proactive plan to manage component headwinds. Our new AI-powered transformation initiative will further fortify our cost structure, ensuring we continue to deliver sustainable, long-term value to our shareholders.