HP Inc. (HPQ.US) Plunges After Hours as Full-Year Earnings Forecast Cut, Tariff Costs and Economic Weakness Weigh

HP Inc. (HPQ.US) experienced a sharp decline in after-hours trading, dropping approximately 15% following the release of a profit outlook that fell short of expectations and a lowered full-year earnings forecast. The company cited ongoing tariff-related costs and a weakening economy as dual pressures. At the time of reporting, HP’s after-hours decline was 11.47%, closing at $24.08 per share.

For the fiscal second quarter ending April 30, HP reported revenue of $13.2 billion, representing a 3.1% year-over-year increase and surpassing market expectations. Earnings per share for the period were $0.71, below the consensus estimate of $0.81.

The company forecasted adjusted earnings per share between $0.68 and $0.80 for the third quarter ending in July, underperforming analysts’ average projection of $0.91. CFO Karen Parkhill indicated that tariff-related impacts and expenses associated with relocating production out of China reduced earnings per share by $0.12.

In an interview, CEO Enrique Lores highlighted that escalating economic uncertainty tied to tariffs is negatively affecting PC demand more than previously anticipated. HP is expanding manufacturing operations in Vietnam, Thailand, India, Mexico, and the United States. Lores further stated that by the end of June, nearly all products sold in North America will be produced outside China. However, due to economic slowdown, growth in the personal computer market is expected to moderate.

HP revised its full-year adjusted earnings per share guidance downward from the previous range of $3.45 to $3.75 to a new range of $3.00 to $3.30, substantially below the forecasted $3.56 per share.

Lores remarked, “Clearly, the current economic environment is markedly different from February, with consumer and some business confidence noticeably shifting.” He also noted that, beyond economic weakness, industry-wide price increases are contributing to weakened demand, emphasizing the need for caution.

Although the personal computer market has shown recovery signs in recent quarters, tariffs continue to hamper progress. IDC reported a 4.9% increase in PC shipments for the March quarter, partially driven by customers accelerating purchases ahead of the tariff announcement on April 2 by former President Trump.

HP’s Personal Systems segment, which includes personal computers, generated $9 billion in revenue, a 7% increase that exceeded the average analyst estimate of $8.8 billion. Lores stated that the effect of customers buying early was “relatively small.” He added, “We expect to fully offset the trade-related cost increases by the fourth quarter.”