At the start of the fiscal year, HP Inc. aimed to drive profitable growth, accelerate key initiatives, and enhance operational efficiency. The company achieved these goals, resulting in a strong performance in the second quarter and first half of the fiscal year. HP’s progress includes sequential and year-over-year growth in non-GAAP operating profit and EPS. HP’s Future Ready plan emphasizes investment in innovative technologies, particularly AI and hybrid solutions.

Second Quarter Results

HP managed a competitive environment well, with net revenue only down 1%. Personal Systems grew for the first time in eight quarters, indicating market stabilization. Non-GAAP operating profit and EPS both saw year-over-year increases.

Key Innovations

HP introduced over 100 AI-enabled solutions and launched the HP AI Creation Center. Strategic collaborations with NVIDIA and Deloitte, and partnerships with Microsoft and Scuderia Ferrari, highlight HP’s innovation drive. HP’s sustainability efforts earned it a AAA rating from CDP for the fifth consecutive year.

Business Segment Performance

Personal Systems revenue grew 3% year-over-year, driven by commercial recovery and growth in gaming and managed services. Print revenue decreased 8% year-over-year, impacted by soft demand and competitive pricing, but HP made gains in pricing and share.

Financial Outlook

HP expects continued market challenges but remains confident due to the anticipated PC refresh cycle and AI PC demand. The company aims to deliver $1.6 billion in annual cost savings by the end of fiscal year 2025 and plans to return nearly 100% of its free cash flowThe cash flow statement provides a detailed overview of the cash inflows and outflows of a company over a specified period of time. It includes cash received from operations, inves... More to shareholders in fiscal year 2024.

Strategic Priorities and Technological Innovations

HP has made substantial progress with its Future Ready plan, continuing to invest in innovative technologies with a strong emphasis on AI and hybrid solutions. This report covers HP’s second-quarter results, the recovery in commercial PCs, progress against strategic priorities, key innovations brought to market, and expectations for the remainder of fiscal year 2024.

Second Quarter Results

Despite a dynamic and competitive environment, HP navigated well, with net revenue down only 1%, marking the fourth consecutive quarter of a slowing rate of decline. Personal Systems returned to growth for the first time in eight quarters, indicating market stabilization and solid execution. Non-GAAP operating profit grew by 2%, and non-GAAP EPS was up 4% year-over-year, slightly above the midpoint of last quarter’s guidance.

Key Innovations and Product Launches

In Q2, HP introduced several significant innovations. At the Amplify Partner Conference in March, the company showcased over 100 AI-enabled solutions aimed at redefining productivity and collaboration. This event, HP’s largest annual channel conference, attracted over 1,500 of its top partners from 95 countries, inspiring partners and driving long-term sustained growth.

AI and Workstation Solutions

For the more than 500,000 data scientists using HP’s workstation solutions to create AI models, the company announced the HP AI Creation Center, the world’s most comprehensive workstation solutions for AI development. HP also unveiled a strategic collaboration with NVIDIA to integrate their pre-trained models and software into HP’s AI Studio toolset, allowing customers to access, share, and edit their data science workflows from anywhere.

AI PCs and Hybrid Solutions

HP launched the industry’s largest portfolio of AI PCs, the first to deliver the benefits of running AI locally on the device for improved performance, efficiency, and privacy. In the printing sector, AI is set to unlock opportunities for smarter, more efficient, and personalized printing. HP unveiled a new color laser jet series optimized for small and medium businesses.

The company expanded its hybrid systems portfolio with the Poly Studio 360-degree camera, enhancing immersive meeting experiences, and introduced an enhanced workforce experience platform for CIOs, providing an AI-enabled digital experience to unlock team potential. Additionally, HP launched the industry’s first-ever broad-based AI master class training and certification program for partners and sales teams.

Strategic Collaborations and Brand Strength

Last week, at the Microsoft Copilot Plus PC event, HP introduced the world’s most powerful ultra-mobile next-gen AI PCs. These devices, designed from the ground up, enable on-the-go leaders and freelancers to harness powerful AI technologies. HP’s new AI Helix logo helps easily identify and select this new category of devices, which have received overwhelmingly positive reactions.

Collaboration with Deloitte Consulting

In collaboration with Deloitte Consulting, HP created an on-device assistant to drive efficiency around common IT support challenges, potentially returning close to 100,000 hours of productivity to their practitioners. This example highlights the positive impact of AI PCs.

Partnership with Scuderia Ferrari

This quarter, HP announced a historic title partnership with Scuderia Ferrari, enhancing its brand and reaching new audiences, particularly younger and premium customers. This partnership also improves the effectiveness and efficiency of HP’s marketing spend, leveraging the latest HP innovations to help Scuderia Ferrari drive their competitive advantage.

Sustainability and Social Impact

HP is a trusted brand that stands for more than just the products it makes. For the fifth year in a row, HP earned a AAA rating from CDP. Next month, HP will release its annual sustainable impact report, outlining progress towards climate action, human rights, and digital equity goals.

Detailed Business Segment Performance

Personal Systems

HP executed its strategy effectively, driving revenue growth and increasing profitability year-over-year. Personal Systems revenue was $8.4 billion, up 3% year-over-year, driven by market growth and signs of commercial recovery. PS operating profit was 6%, in line with expectations and within HP’s long-term target range.

HP continues to invest and grow in high-value and key growth areas. In gaming, revenue grew year-over-year, and PS services saw strong growth in managed services. Hybrid systems showed signs of recovery, with sequential growth and strong performance in video collaboration. HP anticipates the introduction of AI PCs will accelerate demand beyond the expected PC refresh cycle and Windows 11 rollout.

Print Segment

Print revenue was $4.4 billion, down 8% year-over-year and flat quarter-over-quarter. HP continued to see soft demand, particularly in China and parts of Europe, with a competitive pricing environment. However, HP made progress on pricing and share gains in supplies, delivering print operating profit of 19%, in line with guidance.

HP focused on regaining profitable share, growing quarter-over-quarter in home and office, and year-over-year in Big Tanks and Business Inc. The company also saw growth in consumer services, with increases in revenue and subscriber numbers across Instant Ink and new All-In plans. Industrial Graphics revenue grew for the third straight quarter, and 3D saw growth in services and supplies despite a decline in hardware.

Future Ready Transformation and Financial Outlook

HP made significant progress against its Future Ready strategy, executing according to plan. The company is on track to deliver $1.6 billion in annual gross run rate structural cost savings by the end of fiscal year 2025. HP remains committed to its capital allocation strategy, expecting to return approximately 100% of its free cash flow to shareholders in fiscal year 2024.

Financial Highlights

Net revenue was $12.8 billion, down 1% both nominally and in constant currency. Gross marginGross margin is a critical financial metric that plays a pivotal role in evaluating a company's financial health and profitability. It is a percentage that indicates how efficientl... More was 23.6%, up 1 point year-over-year due to lower commodity and logistics costs and cost savings. Non-GAAP operating expenses were $1.9 billion, or 14.8% of revenue. Non-GAAP operating profit was $1.1 billion, up 2%. HP generated solid free cash flow, achieved by reinvesting in key growth areas and AI while managing a mixed market environment.

Insights

1. HP’s strategic focus on AI and hybrid solutions drives innovation and market leadership.
2. Personal Systems growth signifies market stabilization and effective execution.
3. Sustainability remains a core value for HP, recognized by consistent AAA ratings.
4. Strategic collaborations and partnerships enhance HP’s competitive edge and market reach.
5. Financial discipline and targeted investments position HP for future growth.

The Essence (80/20)The Origins and Evolution of the 80/20 Principle The Discovery by Vilfredo Pareto In 1897, Italian economist Vilfredo Pareto uncovered a striking pattern in his study of wealth and... More

HP Inc.’s core topics for comprehensive understanding:

• Profit Growth: Achieving profitable growth through strategic focus and execution.
• Innovation: Investing in AI and hybrid solutions, leading to significant product launches and collaborations.
• Market Performance: Personal Systems and Print segments’ performance, indicating market trends and HP’s response.
• Financial Strategy: Managing costs, driving efficiency, and reinvesting in growth areas while maintaining shareholder returns.

The Action Plan

1. Sustain Innovation: Continue investing in AI and hybrid solutions, maintaining HP’s competitive edge.
2. Enhance Market Execution: Focus on growing Personal Systems and managing Print segment challenges.
3. Financial Discipline: Achieve cost savings targets and manage capital allocation effectively.
4. Strengthen Collaborations: Leverage strategic partnerships to enhance product offerings and market presence.
5. Promote Sustainability: Maintain leadership in sustainability efforts, aligning with corporate values and market expectations.

Blind Spot

Potential Overreliance on AI: While AI is a significant growth driver, HP should ensure balanced investments across other emerging technologies to mitigate risks associated with overdependence on a single innovation area.

HPQ Technical Analysis

Price Action and Moving Averages:

• The stock price is currently at $32.80.
• There is a significant upward trend, particularly noticeable since early May, where the stock has risen sharply from around $28.
• The 50-day moving average (blue line) is at $29.93, which is above the 200-day moving average (red line) at $29.25, indicating a bullish crossover that occurred recently. This suggests a strong bullish trend.

Volume:

• Volume spikes are evident on days with large green candles, indicating strong buying interest.
• The most recent volume is at 12.48 million, which is relatively high, supporting the recent price increase.

Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI):

• The RSI is at 72.55, which is above the overbought threshold of 70. This suggests that the stock may be overbought and could face a short-term pullback or consolidation.

On-Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV):

• The OBV line is trending upward, indicating that volume on up days is higher than on down days. This is a bullish sign and supports the upward price trend.

Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More:

• The Stochastic RSI is at 0.798, which is close to the overbought level of 1. This reinforces the indication from the RSI that the stock might be overbought in the short term.

Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More (ADX):

• The ADX is at 42.75, which is above 25, indicating a strong trend. This suggests that the current upward trend is strong and likely to continue.

Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More:

• The Chaikin Oscillator is at 1.20 million, which is positive. This indicates accumulation and supports the bullish trend.

Time-frame Signals:

• 3-Month Outlook: Buy. The recent bullish crossover of the moving averages, strong volume, and positive OBV suggest that the upward momentum is likely to continue in the short term.
• 6-Month Outlook: Hold. While the short-term indicators are positive, the overbought RSI and Stochastic RSI suggest that there might be a pullback or consolidation. However, the strong trend indicated by the ADX suggests holding for potential further gains.
• 12-Month Outlook: Buy. The strong trend and accumulation indicators suggest a favorable long-term outlook. The recent bullish crossover of the moving averages further supports a long-term bullish stance.

Overall, the technical indicators suggest a strong bullish trend for HP Inc. with short-term caution due to overbought conditions.

Remember, past performance is not an indication of future results. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

HP expects a dynamic and competitive demand environment in the second half of fiscal year 2024. However, the anticipated commercial PC refresh and early gains from AI PCs, along with plans to gain share in print, give the company confidence in driving growth in core businesses. HP sees significant opportunities to accelerate in key growth areas and remains confident in its strategy as it enters the second half of the fiscal year.

HP delivered solid financial results in Q2 through disciplined financial management and focused execution. The company is pleased with its progress and remains committed to its goals for the remainder of the fiscal year.

HP Inc. Second Quarter 2024 Earnings Report – FAQ

Frequently Asked Questions

1. What were HP Inc.’s main goals at the beginning of the fiscal year?

HP Inc. aimed to drive profitable growth in core areas, accelerate key growth initiatives, and deliver operational efficiency.

2. How did HP perform in the second quarter of fiscal year 2024?

HP delivered solid financial results with a 2% growth in non-GAAP operating profit and a 4% increase in non-GAAP EPS year-over-year, despite a dynamic and competitive environment.

3. What strategic priorities has HP focused on?

HP has focused on its Future Ready plan, investing in innovative technologies, particularly in AI and hybrid solutions.

4. What were the key innovations introduced by HP in Q2 2024?

HP introduced AI-enabled solutions, the HP AI Creation Center, AI PCs, and hybrid solutions including the Poly Studio 360-degree camera and an AI-enabled workforce experience platform.

5. How has HP collaborated with NVIDIA?

HP partnered with NVIDIA to integrate their pre-trained models and software into HP’s AI Studio toolset, enhancing AI development capabilities.

6. What is the significance of HP’s new AI PCs?

HP’s AI PCs are the first in the industry to deliver the benefits of running AI locally on the device, improving performance, efficiency, and privacy.

7. How did HP perform in the Personal Systems segment?

Personal Systems revenue was $8.4 billion, up 3% year-over-year, driven by market growth and signs of commercial recovery, with operating profit at 6%.

8. What were the highlights of HP’s Print segment performance?

Print revenue was $4.4 billion, down 8% year-over-year but flat quarter-over-quarter, with progress in pricing and share gains in supplies, achieving a 19% print operating profit.

9. How has HP partnered with Scuderia Ferrari?

HP announced a historic title partnership with Scuderia Ferrari, enhancing its brand and reaching new audiences, particularly younger and premium customers.

10. What sustainability achievements has HP made?

HP earned a AAA rating from CDP for the fifth consecutive year and will release its annual sustainable impact report outlining progress towards climate action, human rights, and digital equity goals.

11. What financial outlook does HP have for the remainder of fiscal year 2024?

HP expects a dynamic demand environment but is confident in driving growth in core businesses through the anticipated commercial PC refresh, early gains from AI PCs, and plans to gain share in print.

12. How is HP progressing with its Future Ready transformation?

HP is on track to deliver $1.6 billion in annual gross run rate structural cost savings by the end of fiscal year 2025 and remains committed to its capital allocation strategy.

Book Recommendations and Their Relevance to the Article

1. “Measure What Matters” by John Doerr
   • Description: This book explores the concept of Objectives and Key Results (OKRs), a goal-setting framework that has driven success in many organizations. It emphasizes the importance of clear, measurable goals and tracking progress toward these goals to achieve significant results.
   • Relevance: HP Inc.’s focus on driving profitable growth, accelerating key initiatives, and enhancing operational efficiency aligns well with the principles of OKRs. The company’s clear objectives and the measurable results reported in the article, such as non-GAAP operating profit and EPS growth, reflect a strategic application of goal-setting frameworks like those discussed in Doerr’s book.
2. “AI Superpowers: China, Silicon Valley, and the New World Order” by Kai-Fu Lee
   • Description: This book provides an in-depth analysis of the AI industry’s development in China and the United States, highlighting the competitive dynamics and the future landscape of AI technologies. It also discusses the implications of AI on the global economy and the workforce.
   • Relevance: HP’s significant investments in AI technologies, as described in the article, underscore the importance of understanding the global AI landscape. Lee’s book offers insights into how AI advancements can be leveraged for competitive advantage, which is directly relevant to HP’s strategy of integrating AI into its product offerings and business processes.
3. “Good to Great: Why Some Companies Make the Leap… and Others Don’t” by Jim Collins
   • Description: This classic business book analyzes why some companies achieve sustained success while others do not. Collins identifies key factors that contribute to making the leap from good to great, including disciplined people, disciplined thought, and disciplined action.
   • Relevance: HP’s journey towards achieving operational efficiency and market leadership parallels the principles outlined in Collins’ book. The article highlights HP’s disciplined execution, strategic focus on innovation, and commitment to long-term goals, which are central themes in “Good to Great.” HP’s progress in its Future Ready plan and the execution of strategic priorities reflect the disciplined approach Collins advocates for achieving greatness.