HP GAVE a profit outlook for the current quarter that fell short of expectations, citing the impact of rising component costs and tariffs on goods from China.
Earnings, excluding some items, will be 75 US cents to 85 US cents a share in the period ending in April, the company said on Thursday (Feb 27). Analysts, on average, estimated 85 US cents.
Rising component costs and US tariffs on imports from China are weighing on profit, chief executive officer Enrique Lores said. Still, a diverse supply chain is helping HP mitigate most of the impact, and by the end of the fiscal year less than 10 per cent of goods sold in North America will come from China, he added.
Investors have been concerned about the impact of US President Donald Trump’s planned tariffs on the computer industry, which is highly reliant on imports from overseas manufacturing hubs. Like many tech peers, HP contributed to Trump’s inauguration fund earlier this year.
As far as product pricing in response to the tariffs, HP will be making some “specific adjustments”, Lores said.
HP will also cut from 1,000 to 2,000 workers through the end of the fiscal year which ends in October. This will save an additional roughly US$300 million per year, the company said.
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The shares dipped about 3.5 per cent in extended trading after closing at US$33.13 in New York. The stock has gained 1.5 per cent this year.
In the fiscal first quarter, which ended Jan 31, revenue increased 2.4 per cent to US$13.5 billion, led by a 10 per cent expansion in sales for business computers. That exceeded analysts’ average estimate of about US$13.4 billion.
A recovery in the long-ailing personal computer (PC) market has started to materialise in recent quarters. Shipments of PCs ticked up 1.8 per cent in the fourth quarter of 2024, according to IDC, an industry research firm.
Earlier this month, HP announced it would acquire assets from Humane, the maker of the wearable Ai Pin introduced in late 2023, for US$116 million. It is part of HP’s push to offer more generative artificial intelligence (AI) features locally, especially through AI-optimised PCs.
HP also affirmed its previous guidance for 2025 free cash flow of as much as US$3.6 billion and annual adjusted profit of as much as US$3.75 per share. BLOOMBERG
