HP Inc.

Good day, everyone, and welcome to the third quarter 2025 HP Inc. Earnings Conference Call. My name is Krista, and I'll be your conference moderator for today's call. At this time, all participants will be in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by the zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Orit Keenan-Nahoon, Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to HP's third quarter 2025 earnings conference call. With me today are Enrique Lores, HP's president and chief executive officer, and Karen Parkhild, HP's chief financial officer. Before handing the call over to Enrique, let me remind you that this call is a webcast and a replay will be available on our website shortly after the call for approximately one year. We posted the earnings release and accompanying slide presentation on our investor relations webpage at investor.hp.com. As always, Elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties, and assumptions. For a discussion of some of these risks, uncertainties, and assumptions, please refer to HP's SEC report, including our most recent form, 10-K. HP assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in HP's SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding year-ago period. In addition, unless otherwise noted, references to HP channel inventory refer to Tier 1 channel inventory, and market share references are based on calendar quarter information. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the comparable GAAP information. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. With that, I'd like to turn the call over to Enrique.

Thank you, Orit, and thank you to everyone for joining today's call. Let me start by saying we made solid progress against our goals and key strategic initiatives in Q3. We continue to execute with discipline and focus, delivering on our commitments and advancing our ambition to be a leader in the future of work. Today, We will take a closer look at our third quarter performance, highlight some of our newest innovations, and discuss our Q4 outlook. Beginning with our performance, I am pleased to report that we delivered a fifth consecutive quarter of growth in Q3. Top line revenue increased 3% year over year, driven by strong performance in personal systems. This momentum was fueled by continued Windows 11 refresh, AI-TC adoption, and services growth. We also drove collective double-digit growth year over year and sequentially in our key growth areas. Our operating profit margins for both print and personal systems were in line with our guidance. A non-GAAP EPS was slightly above the midpoint of our guide, reflecting a sequential improvement of 6%. These results demonstrate our ability to execute our plan and adapt quickly to the evolving trade environment. We are on track to reach our future ready gross annualized savings of $2 billion by the end of fiscal year 25, which we expect will help drive continued improvements in operating profit. At the same time, we are making solid progress on our actions to mitigate higher trade-related costs, including manufacturing diversification, cost reduction, and pricing adjustments. This quarter, as planned, nearly all products sold in North America are now built outside of China, helping to further reduce trade-related costs. We continue to ramp up production across Vietnam, Thailand, Mexico, and the US. Most importantly, we have done what we said we would. We have demonstrated we can remain agile in responding to external pressures while staying focused on our long-term strategy. Now, let me share more color on the performance of each business unit. In personal systems, revenue grew 6% year over year, above our expectations. We continued to shift our mix to higher value segments such as AIPCs commercial premium, and services. We saw strong year-over-year growth in both commercial and consumer segments. Commercial performance was supported by the Windows 11 refresh and increased AI PC adoption. We are very pleased with accelerating demand for the AI PC category, which grew revenue double digit sequentially. It has surpassed our expectations, with shipments continuing to ramp, now reaching over 25% of our mix, a quarter ahead of our plan. Consumer growth was supported by a strong back-to-school season. In our key growth areas, we deliver double-digit revenue growth in advanced compute solutions. In services, momentum continued with strong revenue growth year over year, driven mainly by digital services and managed services. Yes, we did see software demand in hybrid systems, as companies are delaying some of their IT projects. Our installed base of active AIPC users is growing significantly and positioning as well for future AI-driven innovations. We are seeing strong momentum in the AIPC ecosystem with a number of software companies introducing solutions growing by double digits quarter over quarter. We are working closely with Microsoft and Silicon providers to capture the opportunity created by the AIPC platform. Key ISV partners such as Adobe and Zoom are shifting workloads locally to take advantage of the NPU. We grew share in high-value categories, especially in premium segments. This includes year-over-year and sequential gains in PC commercial premium, consumer premium, and AI PCs. Last quarter, we committed to actions to return our personal systems operating margin to its long-term target range. I am pleased to report we achieved that, delivering an operating margin back into our target range. Turning to print, revenue declined 3% in constant currency as expected. Our key growth areas in print continued to perform well and had strong growth year over year. While we continue to take actions to mitigate the increase in trade-related costs, we saw overall a more aggressive pricing environment. Demand in the office segment was slightly softer than anticipated, particularly across North America and parts of Europe. However, we maintained our shared position in office, and we continue to focus on profitable unit placements. In home, we maintain discipline in a competitive pricing environment. Supplies revenue performed as expected. Diving deeper into our key growth areas, consumer subscriptions had a strong ramp in new subscribers of our all-in plan. We had key wins with workforce solutions in industries such as finance, manufacturing, retail, and public sector. We saw another quarter of strong growth in industrial graphics, with share gains year over year reflecting the strength of our portfolio. Now, let's take a closer look at recent innovations that are positioning us as a leader in the future of work. In Q3, we advanced our portfolio of AI-powered solutions that help businesses derive growth and employees achieve professional fulfillment. On the commercial side, Our AIPC lineup received industry recognition. Our EliteBook Ultra was named Top AIPC in the CRN Tech Innovator Awards. It was noted for its design, performance, and impact on productivity. Our Workforce Experience Platform was recognized in the Enterprise IT Management category. praised for its ability to reduce digital friction and improve IT efficiency. Since launch, the platform has been deployed in 40 countries, and we plan to expand to more than 30 additional countries in the coming months. We are redefining how people connect and collaborate. We introduced HP Dimension with Google Beam, a video communication tool that uses six cameras and AI to generate 3D video of participants designed to enhance remote collaboration. And we are excited to bring advanced AI capabilities to a broader audience with our Omnibook 5 notebook. For the prosumer, it delivers high performance and up to 34 hours of battery life empowering customers to stay productive longer. In our print portfolio, we are integrating AI to drive intelligent automation and customer-centric design. HP Neo, an AI-powered chatbot for industrial print, is helping print shops improve production efficiency. In large format, HP Build Workspace, an AI vectorization tool helps architecture, engineering, and construction professionals reduce drafting time by up to 80%. Responsible innovation and sustainability are foundational to our future of work efforts, and we continue to demonstrate meaningful, measurable impact. Today, 99% of HP home and office printers, desktops, notebooks, displays, and workstations incorporate recycled content. We have reached 100% renewable electricity across our U.S. operations, marking a significant step toward our net zero goal. And in partnership with the YMCA, we're establishing digital hubs that have already reached over 700,000 people worldwide. helping them succeed in the digital age. In addition, HP is pleased to support the White House initiative to advance AI education for America's youth. This is an important step toward equipping the next generation with the skills needed to thrive in the future of work. As we look ahead, we remain confident in the strength of the PC market in 2025. We expect the market to grow mid-single digits in the second half with continued stroke momentum from Windows 11 refresh and the AI PC adoption. We believe this catalyst will continue to drive PC market growth in 2026. We expect the print market to decline low single digits in 2025 and at a similar level in 2026. However, our strategy is focused on protecting the operating profit contribution of the premium business to the company. We will continue focusing on reducing unprofitable units by shifting to big tank, increasing lifetime customer profitability through growth in our consumer subscription business. gaining share in the higher value office categories, growing our key growth areas, and maintaining cost discipline. AI is also opening new possibilities to transform how we operate and compete. Beyond driving structural cost reductions, we see tremendous potential to automate additional workflows, streamline decision making, and accelerate innovation across the business. These capabilities will help us reduce complexity and drive lower costs. You will hear more about this from us in the quarters ahead. Externally, we recognize there is continued uncertainty in the global trade environment. We have planned for today's landscape and have proven our ability to respond quickly to any future changes. Through our actions, we have strengthened our operational agility and have full confidence in our ability to navigate evolving conditions. As we continue to adapt to this dynamic environment, engagement with investors is a top priority. We are looking forward to sharing our long-term plans during our Investor Day in early 2026. There, we'll provide updates on our progress and explore the exciting opportunities ahead to advance our strategy. Before I close, I want to thank our employees for their dedication, resilience, and customer-first mindset, which have been key to our progress. We know what it takes to deliver results and be a leader in the future of work, and we are executing with focus. Let me hand it over to Karen.