HP Inc. hastens China exit as tariffs kick a hole in its profits

Hiked prices and thinks that will make buyers nervous

HP Inc. is close to ending production of North-America-bound products in China, after US tariffs kicked a hole in its quarterly profits.

“A quarter ago, we shared that our goal was to have less than ten percent of the products in North America being shipped from China by September,” HP president and CEO Enrique Lores told investors on the company’s Q2 2025 earnings call. “We have accelerated that and we share that now almost no products will be coming from China sold in the US by June. It’s a very significant acceleration of the plan that we have.

“We accelerated the shift of factories out from China into Southeast Asia, into Mexico to a certain extent in the US to mitigate the impact of the change,” he added.

Lores also revealed that HP has removed the US as a distribution hub for products sold in Canada or to Latin America. Doing so means HP doesn’t have to pay tariffs.

Lores on Wednesday blamed lower than expected profits on “additional tariff costs that could not be fully mitigated in the quarter”.

The PCs-and-printers outfit posted $13.2 billion revenue for its Q2 2025 ended April 30, up 3.3 percent year over year. Earnings per share, however, came in at $0.71 – rather below the expected $0.79.

CFO Karen Parkhill said HP “worked aggressively to respond to changes in the regulatory trade environment” however “tariff increases announced in April were higher than expected.

“The full benefit of these mitigating actions can take a few months lead time depending on the scope,” she added, before pledging that HP will “fully mitigate” the impact of tariffs by Q4 – which runs from August to October.

For now, HP has taken what Lores called “price actions” – aka price increases – for personal systems and printing hardware. The CEO said HP’s competitors have done likewise in both fields.

Lores warned that HP thinks the company might not fare well in the second half of its financial year.

“We are today in a very different economic situation from where we were a few months ago in terms of both consumer and business confidence,” he said. Combined with increased prices, he predicted potential “impact in the demand that we see” for both retail and business products.

Parkhill said businesses buying new PCs due to Microsoft ending support for Windows 10 should help sales. Lores said some of those buyers will pick AI PCs because they want to take advantage of AI-enabled software – once it arrives.

“We are very pleased with the progress that we see in AI PCs,” he said. “Our goal is that there will be more than 25 percent of the mix of PCs by the end of the year.” ®