HP Inc. (HPQ) Stock Analysis and Equity Research Report for FY2025

Welcome to our comprehensive HPQ stock analysis and equity research report for FY2025. As a leading provider of personal computers, printing technologies, and AI-enabled solutions, HP Inc. (HPQ) continues to navigate the evolving tech landscape. This report dives into HP Inc.'s business overview, financial performance, SWOT analysis, and valuation insights to help investors make informed decisions. Based on the latest data as of November 30, 2025, including HPQ's fiscal 2025 results with net revenue of $55.3 billion, we explore opportunities in AI PCs and potential challenges.

3 Most Important Points from HP Inc. Business Overview

1. Core Business and FY2025 Financial Performance: HP Inc. is a global leader in personal computers (PCs) and printing technologies, operating through Personal Systems (PS) and Printing segments, with a focus on AI-enabled devices and sustainable solutions. For FY2025 (ended October 31, 2025), the company achieved net revenue of $55.3 billion, a 3.2% year-over-year increase, primarily driven by recovering PC demand and AI adoption in the PS segment, which contributed 66% of total revenue ($36.5 billion, +5.1% YoY). This growth offset a 1.2% decline in the Printing segment ($18.8 billion), highlighting PS's strategic dominance amid broader market recovery.
2. Geographical Diversification and Revenue Evolution: HP maintains a balanced global footprint, with the U.S. (Americas) accounting for 38% of FY2025 revenue ($21.0 billion), followed by EMEA (30%, $16.7 billion) and APJ (22%, $12.0 billion), and non-U.S. Americas (10%, $5.6 billion). Over FY2021–FY2025, total revenue grew cumulatively by 8.4% to $55.3 billion, with APJ showing the strongest expansion (18.8% cumulative growth) due to emerging market opportunities and supply chain diversification, while U.S. and EMEA contributions remained stable, mitigating risks from regional economic and currency fluctuations.
3. Competitive Advantages, SWOT Highlights, and Strategic Outlook: HP's strengths include market leadership (second-largest in PCs by shipments), robust R&D investment ($1.5 billion in FY2025) for AI innovations like the OmniBook series, and recurring high-margin revenue from printing supplies (over 70% of Printing margins), supported by a strong balance sheet generating $2.5 billion in free cash flow. Key opportunities lie in AI PC growth (targeting 10-15% annual PS expansion through FY2028) and APJ/services diversification, though threats from PC cycle volatility, competition (e.g., Lenovo), and supply chain risks persist. Management's strategy emphasizes AI acceleration, operational efficiencies ($1 billion cost-saving initiative), and customer-centric growth, guiding mid-single-digit revenue increases for FY2026–FY2028 and 5-7% CAGR to $70 billion by FY2030, with non-GAAP EPS of $3.20–$3.40 in FY2026.

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Key Financial Insights for HP Inc. (HPQ)

1. Modest Revenue Recovery with Persistent Long-Term Declines: HP's FY2025 net revenue grew 3.2% year-over-year to $55.3 billion, rebounding from a -0.3% decline in FY2024 and a -14.7% contraction in FY2023, primarily driven by the Personal Systems (PS) segment's 5.1% expansion to $36.5 billion (66% of total), fueled by commercial PC demand and AI-enabled device shipments. However, the Printing segment declined 1.2% to $18.8 billion (34% of total), reflecting secular hardware weakness partially offset by supplies revenue. Over the five-year period (FY2021-FY2025), revenue CAGR was -3.3%, significantly underperforming the S&P 500 Information Technology Index's 12.5% CAGR, underscoring cyclical vulnerabilities in hardware markets; HP outperformed a blended industry average of 1.7% (weighted by segment exposure, per IDC/Gartner data) but lagged broader tech hardware growth.
2. Deteriorating Profitability Amid Cost Pressures and Restructuring: In FY2025, profitability metrics weakened notably, with gross margin contracting 1.5 percentage points to 20.6% ($11.4 billion gross profit, -3.6% YoY), driven by 10-15% higher memory and processor costs in PS and competitive pricing in Printing, despite favorable segment mix from high-margin supplies (72% of Printing revenue). EBIT fell 16.9% to $3.2 billion (5.7% margin, down from 7.1%), impacted by $500 million in restructuring charges for 4,000-6,000 job cuts and forex losses, though partially mitigated by SG&A efficiencies (down 2% as a percentage of revenue via AI automation). Net income declined 8.9% to $2.5 billion (4.6% margin), influenced by stable 18% effective tax rate and 5% higher interest expense on $12.1 billion debt; five-year averages show gross margin at 20.7%, EBIT margin at 7.1%, and net margin at 6.2%, pressured by hardware commoditization and negative equity (-$1.3 billion in FY2024).
3. Resilient but Declining Free Cash Flow with Modest Forward Outlook: Free cash flow decreased 11.3% to $2.8 billion in FY2025 (5.1% margin, down from 5.9%), supported by $3.7 billion in operating cash flow from working capital management and Printing supplies' >100% cash convertibility, but offset by 51% higher capex to $897 million for AI R&D and manufacturing investments. Five-year FCF CAGR was -17.1% (average margin 6.3%), reflecting cyclicality yet strong 90%+ conversion to operating cash flow, enabling $1.1 billion in dividends and repurchases. Return metrics highlight efficiency challenges, with ROA averaging 10.1% (FY2021-FY2024) and ROIC at 53.2%, but deeply negative ROE (-275.1% average) due to leverage risks; consensus estimates (Bloomberg/FactSet, as of November 30, 2025) project FY2026 revenue of $57.2 billion (3.4% growth), EPS of $2.85 (non-GAAP $3.30), and FCF of $2.9 billion (5.1% margin), with a Hold rating and $25.88 price target, balancing AI PC upside against macro and printing headwinds.

Final Thoughts

HP Inc. (HPQ) remains a resilient player in the mature PC and printing markets, with FY2025 results demonstrating modest revenue growth of 3.2% to $55.3 billion, driven by AI-enabled Personal Systems expansion amid stabilizing Printing supplies revenue. However, persistent challenges such as negative book value, high debt, and segment-specific headwinds temper the outlook, positioning HP as a defensive holding rather than a high-growth story. Forward guidance for FY2026 indicates mid-single-digit revenue growth and non-GAAP EPS of $2.90-$3.20, supported by a $1 billion AI cost-saving initiative but constrained by macroeconomic uncertainty and tariff risks. Overall, the stock appears undervaluedat its current price of $24.54 (as of November 30, 2025), trading at a forward P/E of 7.3x and EV/EBITDA of 6.3x—well below peer averages like Dell's 10x P/E—offering potential upside for patient investors focused on dividend yield and cash flow generation.

Pros and Cons

HP's strengths lie in its diversified revenue streams, innovation leadership, and shareholder-friendly capital allocation, which provide stability in a cyclical industry. The Personal Systems segment's 5.1% FY2025 growth to $36.5 billion (66% of total revenue) underscores AI PC adoption and commercial demand, while Printing's high-margin supplies (72% of segment revenue) ensure recurring cash flows. With $2.8 billion in free cash flow and a 6.6% dividend yield, HP supports robust returns to investors, including $1.1 billion in buybacks. Long-term opportunities in services (targeting 25% of revenue by FY2030) and APJ expansion (22% of FY2025 revenue, up 4.2% YoY) further enhance prospects.

Conversely, weaknesses include overreliance on volatile PC cycles (PS comprising 66% of revenue), declining Printing hardware sales (down 8% in FY2025), and balance sheet vulnerabilities like negative book value per share of -$0.37 and $18 billion net debt. Competitive pressures from Lenovo and Dell erode market share, while geopolitical risks and restructuring costs ($500 million from 4,000-6,000 job cuts) could pressure near-term margins. The table below summarizes key pros and cons across segments for FY2023-FY2025, highlighting performance trends.

These factors illustrate HP's balanced yet challenged profile, with pros centered on efficiency and innovation outweighing cons in a stable macro environment.

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Valuation Comparison to Current Stock Price

Valuation metrics indicate HPQ is undervalued relative to its fundamentals and peers, with implied prices from DCF, FCF, and net income multiples suggesting 10-100% upside from $24.54. The DCF model, using 3.0% 10-year FCF growth and 8.0% WACC, yields $48.00 per share, a 96% premium, reflecting AI-driven PS potential offset by Printing contraction. FCF multiples (8-12x on $2.8 billion FY2025 FCF) imply $23.43-$35.15, with the mid-point ($29.95) trading at a 22% discount to current levels when adjusted for consensus FY2026 FCF of $2.9 billion. Net income multiples (8-12x on $2.5 billion) range from $21.13-$31.83, averaging $26.48 (8% premium), supported by non-GAAP EPS of $3.12 but pressured by GAAP margin contraction to 4.6%.

Compared to industry averages (PC sector forward P/E ~12x, printing ~9x per Gartner/IDC data), HP's 7.3x forward P/E and 0.42x price-to-sales embed a 30-40% discount, justified by negative equity but undervaluing $4.5 billion adjusted EBITDA. The blended implied price of $34.81 (45% upside) aligns with analyst targets of $25.88 (5.5% upside, Hold rating), but recent earnings beats and cost savings warrant a re-rating toward $30+ if FY2026 PS growth exceeds 6%. The table below compares key valuation metrics to current price and peers for FY2025, using TTM data.

Segment/Aspect	Pros (FY2023-FY2025 Trends)	Cons (FY2023-FY2025 Trends)
Personal Systems	Revenue CAGR +1.2%; AI PCs at 15% of volume in FY2025; margins up to 8.2%	YoY growth volatile (-5.0% in FY2023); consumer softness persists
Printing	Supplies stable at 70-72% of revenue; operating margins 17.8-18.5%	Hardware shipments down 8-29% annually; overall CAGR -4.8%
Overall Financials	FCF averaged $3.2B; dividend yield 6.0-6.6%	Net income CAGR -22.0%; net debt steady at $8.8-9.4B
Strategic	R&D at $1.5B in FY2025; services growth 20% YoY	High competition; tariff impacts 0.5-2% on revenue

At $24.54, HPQ appears undervalued, particularly for income-focused investors, though risks like tariff escalation could cap near-term gains; a buy rating is appropriate below $26 with targets up to $35 on execution.

For the latest HPQ earnings report and stock insights, check sources like HP Investor Relations and Yahoo Finance.

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Metric	HPQ Value	Current Implied Price/Share	Peer Avg. (Dell/Lenovo)	Undervaluation vs. Peers (%)
Forward P/E (7.3x)	$24.54	$24.54	11.0x	34
EV/EBITDA (6.3x)	$24.54	$28.50	8.5x	26
Price/Sales (0.42x)	$24.54	$26.20	0.65x	35
FCF Yield (10.2%)	$24.54	$29.95 (mid-multiple)	8.0%	28