Despite a notable -3.64% dip in its stock price following a recent earnings miss, HP Inc. (HPQ) recently reaffirmed its commitment to shareholder returns with a stable quarterly dividend and concurrently unveiled a strategic partnership poised to tap into the burgeoning green hydrogen market. This juxtaposition of immediate operational headwinds against a backdrop of long-term strategic diversification paints a complex, yet intriguing, picture for investors and analysts scrutinizing the company's trajectory.
This intricate narrative suggests that while HPQ navigates a challenging macroeconomic environment and shifts in its core markets, its leadership is actively pursuing avenues for future growth and maintaining investor confidence through consistent capital returns. The strategic pivots into high-growth areas like AI-enhanced computing and sustainable energy solutions indicate a deliberate effort to evolve beyond its traditional hardware business, setting the stage for a potentially transformative period.
Navigating the Financial Currents: A Deep Dive into HP's Performance#
HP Inc.'s financial performance in the fiscal year ending October 31, 2024, reveals a mixed bag of resilience and ongoing challenges. The company reported revenue of $53.56 billion, a marginal decrease of -0.30% from the $53.72 billion recorded in fiscal year 2023, and a more significant decline from its peak of $63.49 billion in 2021, according to Monexa AI financial data. This trend underscores the persistent pressures in its core Personal Systems and Printing segments, which have faced headwinds from reduced consumer spending and a saturated market.
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However, amidst this revenue stagnation, there are signs of operational efficiency improvements. Gross profit for fiscal year 2024 stood at $11.82 billion, up from $11.51 billion in 2023, pushing the gross profit ratio to 22.07% from 21.42% in the prior year. Operating income also saw an uptick, reaching $3.82 billion in 2024 compared to $3.46 billion in 2023, resulting in an operating income ratio of 7.13%. This suggests that despite top-line challenges, HPQ has managed to enhance its profitability at the operational level, possibly through cost management initiatives and optimizing its product mix. Net income, however, saw a decline to $2.77 billion in 2024, down from $3.26 billion in 2023, indicating that factors below the operating line, such as taxes or non-operating expenses, impacted the bottom line. This represents a -14.96% year-over-year decrease in net income, and a -13.80% decline in diluted EPS, according to Monexa AI.
Free cash flow, a critical indicator of a company's ability to generate cash for investments, debt repayment, and shareholder returns, showed a positive trajectory, increasing by +6.58% to $3.16 billion in 2024 from $2.96 billion in 2023. This is a crucial metric for investors, especially considering the company's consistent dividend payouts. The ability to generate robust free cash flow, even in a challenging revenue environment, provides flexibility for strategic investments and continued shareholder distributions. Capital expenditure remained relatively stable, around $592 million in 2024, reflecting disciplined investment in property, plant, and equipment. The company's cash and cash equivalents stood at $3.25 billion at the end of fiscal year 2024, a slight increase from $3.23 billion in 2023, indicating a stable liquidity position, as reported by Monexa AI.
Key Financial Performance Indicators#
| Metric | FY 2021 (Billion USD) | FY 2022 (Billion USD) | FY 2023 (Billion USD) | FY 2024 (Billion USD) |
|---|---|---|---|---|
| Revenue | 63.49 | 62.98 | 53.72 | 53.56 |
| Gross Profit | 13.42 | 12.34 | 11.51 | 11.82 |
| Operating Income | 5.30 | 4.68 | 3.46 | 3.82 |
| Net Income | 6.54 | 3.13 | 3.26 | 2.77 |
| Free Cash Flow | 5.83 | 3.67 | 2.96 | 3.16 |
Source: Monexa AI Financial Data
Strategic Pivots: AI, Green Hydrogen, and Digital Transformation#
HP Inc. is not merely resting on its laurels in traditional markets; the company is making concerted efforts to redefine its future through strategic initiatives in high-growth areas. A prime example is its aggressive integration of Artificial Intelligence (AI) capabilities across its product portfolio. The launch of AI-enhanced PCs, featuring dedicated Neural Processing Units (NPUs), is a direct response to the evolving demands of enterprise and professional segments, aiming to deliver superior performance, enhanced security, and improved user experience. This move is crucial for rejuvenating the mature PC market, which has seen fluctuating demand. Furthermore, the company is extending its AI strategy to smart printing solutions and expanding into digital services, particularly through its Everything-as-a-Service (XaaS) model. These initiatives are designed to generate new recurring revenue streams, moving away from transactional hardware sales towards more stable, subscription-based models, which could underpin long-term growth, as highlighted at the Bank of America Global Technology Conference on June 4, 2025, according to Seeking Alpha.
Beyond AI, HPQ has also made a significant foray into the renewable energy sector, demonstrating a commitment to sustainability and diversification. On June 10, 2025, the company announced a strategic partnership with Novacium and Pragma Industries focused on accelerating green hydrogen production using METAGENE™ technology, as reported by GlobeNewswire. This collaboration aims to commercialize green hydrogen on a large scale, tapping into a market projected to expand at a compound annual growth rate (CAGR) of over 40% through 2030. Such initiatives not only align HPQ with global sustainability trends but also strategically position it in a rapidly expanding clean energy market, potentially diversifying its revenue streams significantly away from its traditional hardware reliance.
Historically, companies in mature tech sectors have often sought to diversify through M&A or by entering adjacent markets. HPQ's current strategic pivot, particularly into green hydrogen, echoes similar moves by industrial conglomerates seeking to leverage their engineering and manufacturing expertise in new, high-growth sectors. For instance, General Electric's historical diversification into renewable energy segments, while not without challenges, demonstrated the potential for established players to adapt. HPQ's move is a proactive step to secure future relevance and growth, particularly as traditional hardware markets mature and face increasing commoditization. The investment in research and development, which stood at $1.64 billion in fiscal year 2024, reflects a continued commitment to innovation, though this figure has seen fluctuations, being higher at $1.91 billion in 2021, according to Monexa AI. This level of R&D investment, approximately 2.95% of revenue, is crucial for supporting both its AI and green energy ambitions.
Shareholder Returns and Capital Allocation Strategy#
Amidst its strategic transformations, HP Inc. remains committed to returning value to its shareholders. On June 10, 2025, the company declared a quarterly cash dividend of $0.2894 per share, payable on July 2, 2025, to shareholders of record as of June 11, 2025, according to GlobeNewswire. This consistent dividend payout translates to an attractive dividend yield of approximately 4.8% and is supported by a payout ratio of around 42.79%, based on trailing twelve months (TTM) earnings per share of $2.65, as per Monexa AI data. The stability of this dividend, despite recent earnings volatility, signals management's confidence in the company's underlying cash flow generation capabilities.
An examination of HPQ's capital allocation strategy over recent years reveals a notable shift. While the company engaged in substantial common stock repurchases in fiscal years 2021 and 2022, amounting to $6.25 billion and $4.3 billion respectively, these figures significantly reduced to $100 million in 2023 before rebounding to $2.1 billion in 2024, according to Monexa AI. This fluctuation suggests a more dynamic approach to share buybacks, possibly influenced by market conditions, liquidity, and strategic investment priorities. The current focus appears to be on maintaining a consistent dividend while allocating capital towards strategic growth initiatives like AI and green hydrogen, rather than aggressive share repurchases.
This balance between shareholder returns and strategic investments is critical for a company like HPQ operating in maturing markets. A consistent dividend provides a floor for investor confidence and attracts income-focused investors, while targeted investments in future growth areas aim to drive long-term value creation. The management's ability to navigate these competing priorities effectively will be a key determinant of HPQ's future financial health and market positioning.
Market Reaction and Valuation Landscape#
HP Inc.'s stock performance has reflected the broader market's cautious sentiment towards the company, particularly in light of recent earnings reports. Following its Q2 2025 earnings announcement, where the company reported adjusted EPS of $0.71 against analyst estimates of $0.775, and revenue of $12.5 billion missing estimates of $13.2 billion, HPQ's stock experienced a decline of approximately -7.5% on June 13, 2025. This shortfall was primarily attributed to continued weakness in core markets and lingering supply chain disruptions, reinforcing investor apprehension about near-term growth prospects.
As of June 16, 2025, HPQ shares traded at $23.84, representing a -3.64% decrease from the previous close of $24.74, with a market capitalization of $22.39 billion, according to Monexa AI. The company's trailing twelve months (TTM) P/E ratio stands at approximately 9.17x, which is notably below some industry peers and suggests that the market is assigning a lower valuation multiple due to perceived growth challenges and macroeconomic headwinds. For instance, analyst estimates for HPQ's forward P/E are 7.27x for 2025, falling to 6.77x for 2026, indicating expectations of moderate earnings growth or continued undervaluation. The price-to-sales ratio is 0.41x, also suggesting a relatively low valuation compared to revenue. The enterprise value over EBITDA (EV/EBITDA) is 7.42x (TTM), which is also modest.
HP Inc. Earnings Surprises and Valuation Metrics#
| Date | Actual EPS | Estimated EPS | Surprise (%) | P/E Ratio (TTM) | Price/Sales (TTM) |
|---|---|---|---|---|---|
| 2025-05-28 | 0.71 | 0.775 | -8.39% | 9.17x | 0.41x |
| 2025-02-27 | 0.74 | 0.746 | -0.80% | ||
| 2024-11-26 | 0.93 | 0.93 | 0.00% | ||
| 2024-08-28 | 0.83 | 0.86 | -3.49% |
Source: Monexa AI Financial Data
This valuation picture suggests a