HP Q3 2025: PC Growth and a Tax Benefit Drive 19% Earnings Jump

HP Inc. just released its third-quarter financial results for fiscal year 2025, and a dive into the numbers reveals a mixed but interesting picture. The tech giant, a household name in personal computers and printers, is navigating a challenging market. Let's break down the key takeaways from their latest 10-Q filing.

For the three months ending July 31, 2025, HP reported total net revenue of $13.9 billion, a modest 3% increase from $13.5 billion in the same period last year. On the surface, growth is growth. However, the real story emerges when we look at where that revenue came from and how it translated into profit.

The following flow diagram visualizes HP's income statement for the quarter, showing how revenue from its main business segments is transformed into net earnings after accounting for various costs and expenses.

A Tale of Two Segments

HP's business is dominated by two main segments: Personal Systems and Printing. Their performances this quarter were starkly different.

Personal Systems: Growth at a Cost

The Personal Systems division, which includes notebooks, desktops, and workstations, was the engine of growth this quarter.

• Net Revenue: Increased by a healthy 6.0% to $9.9 billion.
• Commercial PC Revenue: Grew 5.4%, driven by a 4.6% increase in average selling prices (ASPs), suggesting a richer product mix.
• Consumer PC Revenue: Also saw a solid 7.5% increase.

However, this growth came at a price. The segment's operating profit fell by 12.3% to $541 million, and its operating margin compressed from 6.6% to 5.4%. The filing points to a "competitive pricing environment," indicating that HP is sacrificing some profitability to gain or maintain market share in the PC space.

Printing: A Managed Decline

The Printing segment, a long-time cash cow known for its high-margin ink and toner supplies, continued its gradual decline.

• Net Revenue: Dropped 3.8% to just under $4.0 billion.
• Supplies Revenue: The most profitable part of this segment, saw a 3.7% decrease.
• Hardware Revenue: Both commercial and consumer printing hardware sales were down.

Despite the revenue slide, the Printing division's profitability remained remarkably stable. Its operating margin was flat at 17.3%, demonstrating strong cost control and the enduring profitability of its supplies business.

The Bottom Line Boost

HP's net earnings for the quarter were $763 million, a significant 19% jump from $640 million a year ago. While the Personal Systems segment's operating profit was down, a few key items below the operating line provided a substantial boost.

Most notably, HP recorded a $139 million benefit from taxes this quarter, a stark reversal from the $187 million tax provision in the same quarter last year. This swing of over $320 million was a major driver of the year-over-year increase in net income. Additionally, operating expenses rose, with restructuring charges more than doubling to $110 million and amortization of intangible assets climbing to $159 million.

In conclusion, HP's latest quarter shows a company executing a difficult balancing act. It is successfully growing its PC business in a fiercely competitive market, albeit with thinner margins. Meanwhile, its legacy Printing business, while shrinking, continues to be a bastion of profitability. The impressive bottom-line growth is a welcome headline, but it's largely propped up by a significant tax benefit rather than fundamental operating improvements. This performance underscores the ongoing challenges and strategic trade-offs HP faces in the evolving tech landscape.