Analysis
HP has successfully mitigated the impact of substantial tariffs introduced in April 2025 by leveraging supply chain shifts, cost-reduction programs, and targeted pricing actions. The company experienced a significant headwind in the first half of fiscal 2025, particularly in the second quarter (2Q25), where tariffs resulted in a roughly 12% impact on non-GAAP earnings per share (Transcript 2Q-2025). However, management aggressively implemented its mitigation playbook and achieved a majority offset of these costs by the third quarter, reaching full mitigation by the end of fiscal 2025 (Annual Report FY-2025).
As of early 2026, the trade environment for HP remains dynamic but is no longer a primary driver of cost headwinds compared to rising commodity prices. Following a February 2026 U.S. Supreme Court ruling that found certain emergency tariffs unconstitutional, HP stated it does not expect to be negatively impacted by the subsequent developments, even with the announcement of newer tariffs shortly after the ruling (Transcript 1Q-2026). The company's focus has shifted toward navigating a sharp increase in memory costs, which now represent approximately 35% of the PC bill of materials for fiscal 2026, up from historical levels of 15% to 18% (Transcript AGM 2026).
HP's long-term strategy for trade resilience involves a deep diversification of its manufacturing footprint. By September 2025, HP aimed to have less than 10% of its products sold in North America manufactured in China, a target that was accelerated by the April 2025 tariff announcement. Additionally, the company has removed the U.S. as a distribution hub for certain regions, such as Canada and Latin America, to avoid tariff exposure. While industry-wide pricing actions taken to offset these various costs are expected to weigh on PC unit demand in calendar year 2026, HP expects to drive revenue growth through share gains in premium categories and AI-enabled PCs (Transcript 1Q-2026).
Data
($M, except per share data)
| Metric | 2Q-2025 | 3Q-2025 | 4Q-2025 | 1Q-2026 |
|---|---|---|---|---|
| Non-GAAP EPS Impact (%) | (12.0%) | < (5.0%) | 0.0% | 0.0% |
| Net Tariff Cost Headwind | $96 | $30 | $0 | $0 |
Source: Company filings, Marvin Labs
Financial Impact
- Cost Impact (Historic): $100M–$150M
- Cost Impact (Forward-Looking): $0
Sources
The net impact of tariffs in 2Q-2025 resulted in a roughly 12% impact on HP's non-GAAP earnings per share.
By the time we exit this year in Q4, we expect to fully mitigate the cost of these current tariffs.
We do not expect to be negatively impacted by the subsequent developments following the court decision.