Recovery Quarter: Revenue +3% YoY With PS +6% Above Expectations on AIPC + Win 11 Refresh; Non-GAAP EPS $0.75 Slightly Above Midpoint of $0.68-$0.80 Guide (+6% Sequentially); PS Operating Margin 5.4% Back in 5-7% Long-Term Range; Tariff Mitigation Largely Working — Majority of Tariff Cost Offset in Quarter; AIPC Penetration >25% a Quarter Ahead of Plan, ISV Ecosystem Growing Double-Digit Sequentially; Print Op Margin 17.3% Solidly in 16-19% Range; Q4 Guide $0.87-$0.97 EPS Midpoint $0.92; Investor Day Announced for Early 2026; $400M+ Returned in Q3 — Maintaining Hold

Coverage Update from Q2 FY25

Three months ago at the Q2 print, we initiated coverage at Hold at ~$27.50 with a $26-$32 fair value range. Our framework: tariff drag would be multi-quarter but recoverable; PS margin would return to 5-7% range in Q3-Q4; AIPC + Win 11 + structural savings + capital return support the floor. The Q3 print delivers on every operational test:

• PS margin recovery confirmed: 5.4% (back in 5-7% range as committed)
• Tariff mitigation largely working: "Majority of tariff costs offset"
• AIPC ahead of plan: >25% of mix in Q3 (FY25 target met one quarter early)
• Future-Ready savings on track: $2B+ target unchanged
• Print margin holding: 17.3% (solidly in 16-19% range)
• Q4 guide trajectory supportive: $0.87-$0.97 EPS midpoint implies FY25 finish at high end
• Investor Day announced: Early 2026 — first Investor Day in some time

Maintaining Hold with fair value range held at $26-$32 pending Q4/FY25 print where the FY26 framework will be articulated.

Results vs. Consensus — Q3 FY25

Q3 Scorecard

YoY Comparison

QoQ Comparison

Quality-of-Print Callout

Segment Performance

Personal Systems ($10.2B revenue / +6% YoY / PS operating margin 5.4%)

Personal Systems delivered the sixth consecutive quarter of growth, revenue +6% YoY (5% unit growth + increased ASPs) above expectations. Mix shifted toward premium categories (commercial premium, consumer premium, AIPCs, workstations, gaming). Strong year-over-year growth in both commercial and consumer segments. Commercial PC revenue +5% on 3% unit growth with Win 11 refresh + AIPC adoption. Consumer revenue and units +8% on robust back-to-school seasonality plus China gaming strength. Sequentially, revenue +10% and units +13% — seasonal strength + share gains.

The key operational achievement: PS operating margin 5.4%, back in the 5-7% long-term range as committed at Q2. The mitigation actions worked — supply-chain shift complete (almost all US-bound built outside China), cost reductions + pricing adjustments offsetting majority of tariff costs.

AIPC mix >25% of PC shipments — the FY25-end target reached one quarter early. AIPC revenue double-digit sequentially. ISV ecosystem expanding double-digit quarter-over-quarter, with Adobe and Zoom shifting workloads to NPU.

Assessment: PS is performing better than the Q2 framework expected. The combination of (a) AIPC penetration ahead of plan, (b) PS margin recovery on schedule, (c) Win 11 refresh momentum continuing, and (d) share gains in premium categories supports continued multi-quarter PS revenue + margin trajectory. We expect Q4 PS margin in upper half of 5-7% range and FY26 PS margin moving toward 6%+ at midpoint.

Print ($3.7B revenue / -4% nominal, -3% CC / Print operating margin 17.3%)

Print revenue declined 4% nominal / 3% CC, in line with expectations. Office market slightly softer than expected — companies prioritizing AI + PC investments over print hardware. Home demand resilient — commercial unit decline -2% mainly hardware-driven; consumer unit growth +3% led by Big Tank. Supplies revenue -3% CC as expected; installed base + usage headwinds partially offset by pricing + share gains in higher-value categories.

Operating margin 17.3% (mid-point of 16-19% range) — flat year-over-year as pricing actions + cost reductions offset increased trade-related costs. Key growth areas in Print continued momentum: consumer subscriptions revenue + subscriber growth (driven by all-in plan), industrial graphics double-digit revenue growth with share gains, workforce solutions wins in financial services / manufacturing / retail / public sector.

Assessment: Print is performing as the structural cash cow we modeled. Hardware market continued decline; supplies declining within long-term range; key growth areas (consumer subscriptions, industrial graphics, workforce solutions) compounding double-digit. Operating margin discipline holding. We expect Q4 Print margin near top of 16-19% range with continued mix shift toward higher-margin recurring revenue.

FY25 Guide — Reaffirmed With Q4 Detail

Key Topics & Management Commentary

Overall Management Tone: Confident on the operational delivery this quarter with measured caution on the macro and trade environment. The CEO frames the quarter as "we have done what we said we could" — a deliberate reference back to the Q2 commitments. The forward-looking tone on Q4 is mildly positive (sequential improvement, full tariff mitigation traction). The Investor Day announcement for early 2026 signals confidence in the multi-year framework articulation.

1. The Tariff Mitigation Largely Worked — PS Margin Recovery Confirmed

"We executed decisively on the actions we laid out to mitigate trade-related headwinds and are pleased with the meaningful progress we made in the quarter, including accelerating supply chain resiliency, cost reduction, and pricing action. As a result, we were able to mitigate the majority of tariff costs in Q3 while delivering operating margins within our expected ranges for both businesses and non-GAAP EPS slightly above the midpoint of our guidance range."
— Karen Parkhill, CFO

The Q3 mitigation traction is the cleanest test of the Q2 framework. PS margin 5.4% back in 5-7% range as committed. The majority of tariff cost offset through (a) supply-chain shift complete, (b) cost reduction actions, and (c) targeted pricing increases. Q4 guide implies continued sequential margin improvement with full tariff mitigation traction.

Assessment: The mitigation framework is operationally validated. We expect full tariff mitigation by Q4 + FY25-end as committed. The underlying cost structure should normalize through FY26 as the diversified manufacturing footprint achieves operational efficiency.

2. AIPC Penetration Ahead of Plan — >25% of Mix a Quarter Early

"We are very pleased with accelerating demand for the AIPC 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. Our installed base of active AIPC users is growing significantly and positioning us well for future AI-driven innovations."
— Enrique Lores, CEO

AIPC mix >25% of PC shipments in Q3 — one quarter ahead of the FY25-end target. AIPC revenue double-digit sequentially. ISV ecosystem expanding double-digit quarter-over-quarter — Adobe and Zoom shifting workloads to the on-device NPU.

The acceleration ahead of plan is structurally bullish for FY26 PC mix + ASP. Combined with Windows 10 EoL in October 2025 driving Win 11 refresh activity, AIPC is the strongest secular tailwind for HP.

Assessment: AIPC trajectory continues to be the most attractive operational lever. We model AIPC reaching 30%+ by end-FY25 and 45-50% by FY27. ASP premium of 5-10% (within the previously guided 10-20% range) provides material PS revenue + margin uplift over the multi-year framework.

3. Print Margin Holding Despite Structural Decline

"Our results reflect a slightly softer than expected office market and a pricing environment that remained competitive despite rising trade-related costs across the industry. … And in line with our guidance, we delivered an operating margin of 17.3%, solidly within our target range and flat year-over-year. As we offset increased trade-related costs with pricing actions and cost reductions."
— Karen Parkhill, CFO

Print operating margin 17.3% — mid-point of 16-19% range, flat year-over-year despite revenue -3% CC decline. Cost discipline + pricing actions + share gains in higher-value categories offsetting the volume decline. Key growth areas (consumer subscriptions, industrial graphics, workforce solutions) continued double-digit growth.

Print continues to be the structural cash cow — declining top line offset by margin discipline. The mix shift toward higher-margin recurring revenue supports multi-year margin durability.

Assessment: Print operating margin durable at 16-18% range through FY25 + FY26. We expect Q4 Print margin near top of 16-19% range with continued mix shift benefit. The structural cash flow contribution from Print is critical to supporting capital return + investment in PS growth areas.

4. Investor Day Announced for Early 2026

"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, where we'll provide updates on our progress and explore the exciting opportunities ahead to advance our strategy."
— Enrique Lores, CEO

HP announced an Investor Day for early 2026 — the first in some time. This signals management's confidence in articulating a multi-year framework post-tariff-cycle. Expected to cover: (a) FY26 financial framework, (b) AIPC trajectory and competitive positioning, (c) Print's structural transformation toward higher-margin recurring revenue, (d) capital return framework post-leverage normalization.

Assessment: The Investor Day is the next major catalyst beyond the Q4 print. We expect framework articulation that supports continued operational confidence. The key question: does the FY26 framework set up mid-single-digit EPS growth or single-digit moderate growth? The answer materially affects the rating arc.

5. Future-Ready Savings on Track — $2B+ Target Reaffirmed

"We are well on track to hit our total program goal of at least $2 billion in annualized gross run rate savings by the end of our fiscal year. These incremental structural savings enable our continued investment in our key growth areas and AI innovation, as well as to help us to mitigate macro uncertainties."
— Karen Parkhill, CFO

Future-Ready savings program on track for $2B+ cumulative gross annual run-rate savings by end-FY25. The savings flow through operating margin and enable investment in AIPC + growth areas + workforce experience platform. AI-enabled internal processes are an accelerating contributor to the savings.

Assessment: The savings target unchanged but the AI-internal-process leg is gaining traction. We expect savings benefit to continue into FY26 with additional incremental savings opportunities likely articulated at the Investor Day.

6. Windows 11 Refresh Cycle Continues

"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 strong momentum from Windows 11 refresh and the AITC adoption. We believe these catalysts will continue to drive PC market growth in 2026."
— Enrique Lores, CEO

HP expects PC market to grow mid-single-digit in H2 (slight raise from prior low-single-digit guide). Win 11 refresh is the catalyst — Windows 10 EoL in October 2025 supports continued enterprise refresh activity through Q4 + H1 FY26. AIPC adoption supplements the refresh.

Critically, management is explicit that these catalysts continue into 2026 — not a one-time pull-forward. This supports the FY26 PS revenue growth framework.

Assessment: The Win 11 refresh + AIPC combination supports multi-quarter PS growth. We expect FY26 PS revenue +3-5% with continued ASP gains from AIPC mix shift + premium category gains.

7. Cash Conversion Cycle Improvement and FCF Recovery

"We generated approximately $1.7 billion in cash from operations in the quarter and roughly $1.5 billion in free cash flow, in line with our expectations. We also improved our cash conversion cycle this quarter, driving days payable up with higher manufacturing activity."
— Karen Parkhill, CFO

Q3 cash from ops $1.7B, FCF $1.5B — strong recovery from Q2's tariff-inventory build. Cash conversion cycle improved sequentially as the diversified manufacturing footprint normalizes operating efficiency. The improvement supports the FY25 FCF guide range of $2.6-$3.0B.

Assessment: FCF trajectory recovering on schedule. Working capital normalization continues through Q4 + early FY26. We expect FY25 FCF landing at $2.8-$2.9B (midpoint of guide).

8. AI Internal Transformation as Cost Lever

"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."
— Enrique Lores, CEO

HP signaling that AI-internal-transformation is the next leg of the cost reduction story. Beyond the $2B+ Future-Ready savings, AI-driven workflow automation provides incremental savings opportunity. This is the multi-year framework lever that supports continued margin expansion.

Assessment: AI-internal transformation is the under-appreciated forward lever. We expect the Investor Day to articulate a specific AI-cost-savings framework, potentially in the $500M-$1B incremental annualized savings range over 3 years.

9. Workforce Experience Platform — Geographic Expansion

"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."
— Enrique Lores, CEO

WXP now deployed in 40 countries with planned expansion to 30+ additional countries in coming months. The platform combines AI-powered telemetry from millions of endpoints with insights for CIOs to manage device fleets. Adoption pattern: enterprise IT departments seeking productivity improvements + device management efficiency.

Assessment: WXP expansion is encouraging — geographic broadening + enterprise adoption pattern supports multi-year scaling. We continue to view WXP as a potential structural margin uplift if adoption reaches material scale. Watching for revenue milestone disclosures at the Investor Day.

10. Trade Environment Continued Uncertainty

"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."
— Enrique Lores, CEO

Trade environment remains fluid — but HP has built operational agility through Q2-Q3 supply-chain and pricing actions. The "we have planned for today's landscape" framing implies the guide assumes current tariff levels persist; any further escalation would require additional mitigation.

Assessment: HP's tariff exposure is structurally manageable given the supply-chain pivot. Continued trade volatility creates ongoing operational pressure but doesn't fundamentally challenge the framework.

11. Hybrid Systems Softer; Services + Workforce Solutions Strong

"In services, momentum continued with strong revenue growth year-over-year, driven mainly by digital services and managed services. Yes, we did see softer demand in hybrid systems as companies are delaying some of their IT projects."
— Enrique Lores, CEO

Mixed signal within PS — services and workforce solutions continuing strong growth, but hybrid systems (video collaboration hardware) softer as companies delay IT capex on collaboration infrastructure. The reallocation of enterprise IT budgets toward AI + PC + AIPC is consistent with the broader macro trend.

Assessment: Hybrid systems softness is consistent with broader macro trends — not a HP-specific issue. Services + workforce solutions strength supports the higher-margin services mix shift.

Analyst Q&A Highlights

Tariff Quantification and Mitigation Progress

Lead analyst question on the tariff cost in the quarter and mitigation magnitude. Management framed the mitigation as "meaningful progress" with majority of tariff costs offset, declining to quantify specific dollar exposure given ongoing fluidity.

Q: "I was just kind of curious about the tariff-related cost in the quarter. Are you able to help quantify what the total impact was, whether it's on a dollar basis or maybe in terms of impact to gross margins? And given all the actions you've taken, how much are you able to offset as opposed to having to absorb by the company?"
— Steven Chin (for Krish Sankar), TD Cowen

A: "We made meaningful progress in the quarter with our mitigation actions, which included accelerating our supply chain to optimize driving cost reduction and taking pricing actions. And as a result, we were able to mitigate the majority of the tariff cost in Q3 while still delivering EPS slightly above the midpoint of our guide. … We do expect to fully offset these trade-related costs as quickly as possible. The full benefit of our mitigating actions really depends on the scope and can take a little bit of time. But, again, we expect to fully mitigate, you know, as quickly as we can."
— Karen Parkhill, CFO

Assessment: The mitigation traction is operationally credible. We expect Q4 full mitigation with continued PS margin trajectory upward.

Print Office Demand and Return-to-Office Dynamics

Question on whether return-to-office trends should support Print office hardware demand. Management's framing: enterprise IT budgets prioritizing AI + PC over print hardware in the short term; pages-printed metrics holding which implies underlying demand support; office hardware demand likely to recover when budgets shift back.

Q: "Just given the number of large enterprises around the world that have announced return-to-office initiatives so far this year, I guess I'm a little surprised that there weren't any improvements to the outlook for the print business. … is there some different dynamic about return-to-office initiatives in terms of spending on supplies and commercial hardware?"
— Steven Chin (for Krish Sankar), TD Cowen

A: "I think there are two dynamics that we need to have in mind. First of all, from an investment perspective, we are seeing enterprise and commercial businesses prioritizing other areas above print. For example, investments in AI or even investments in PCs. So we think that this has impacted in the short term the sales of print hardware in the office side. On the other side, when we look at pages printed, and as you know, this is the most fundamental variable to understand the health of the business going forward, we have not seen a deviation versus our plan."
— Enrique Lores, CEO

Assessment: Print structural decline persists despite return-to-office tailwinds. Pages-printed stability is the leading indicator for medium-term hardware demand recovery. We don't expect Print revenue to inflect to growth but the underlying demand foundation is intact.

AIPC Pricing Premium and ASP Impact

Question on AIPC ASP differential vs. standard PCs. Management confirmed 5-10% pricing premium (within previously guided 10-20% range).

Q: "It's great to see your momentum in your AIPC product category. I think the sequential 25% growth was rather notable. Can you help us understand whether AIPCs carry a higher ASP or margin profile versus non-AIPCs?"
— Irvin Liu (for Amit Daryanani), Evercore ISI

A: "We are very pleased with the growth that we are seeing in AIPCs. And not only of the category by itself, but also of how the ecosystem is being developed because eventually, the demand for the AIPCs is going to be driven by applications. … In terms of pricing, we can confirm the estimations that we had before. We are seeing an uplift in pricing of AIPCs compared to similar units that don't bring this capability. And we maintain the assumptions that we had shared before of the 5% to 10% price increase driven by AIPCs."
— Enrique Lores, CEO

Assessment: AIPC ASP premium of 5-10% supports continued PS revenue + ASP growth. Combined with the >25% penetration and trajectory toward 50% by 2027, AIPC is the structural multi-year framework lever.

Q4 EPS Guide and Sequential Trajectory

Question on the Q4 guide and sequential trajectory. CFO confirmed Q4 EPS step-up driven by PS margin improvement + Print mix + seasonal strength + tariff mitigation.

Q: "As I look at your Q4 EPS guidance, I think the sequential or seasonal increase in EPS for Q4 is at, you know, 17¢ at the midpoint, and it's higher than what we've historically seen. I'm just kind of curious whether this is going to be driven by any sort of margin benefits from your future-ready growth initiatives."
— Irvin Liu (for Amit Daryanani), Evercore ISI

A: "Yes. So our Q4 guide does reflect the sequential improvement from continued PS margin trajectory, with full traction from our tariff mitigation actions, plus seasonal strength. Future-ready cost savings continue to flow through the P&L. And we also have favorable print mix expected with higher supplies mix in Q4 supporting the print margin near the top of our range."
— Karen Parkhill, CFO

Assessment: Q4 sequential trajectory operationally supported. We model Q4 EPS at $0.93-$0.95 (above guide midpoint) and FY25 EPS at $3.15-$3.20 (high end of $3.00-$3.30 guide).

FY26 Framework and Print Long-Term Outlook

Question on the FY26 outlook and Print's structural trajectory. Management deferred specific FY26 numbers to Q4 print and the early-2026 Investor Day, but maintained constructive framing on PC market growth and Print margin durability.

Q: "Can you provide any preliminary framing for FY26 — the trajectory of PS revenue + AIPC mix expectations, the Print trajectory, and how the operational levers translate to FY26 EPS growth?"
— Various analysts (paraphrased)

A: "I will share more on our fiscal 2026 outlook on our Q4 earnings call. … Looking beyond Q4, we expect continued momentum in the refreshed catalyst driving growth in the PC market, and we are confident in the measures we are taking to capitalize on opportunities in the print market and to protect operating profit."
— Karen Parkhill, CFO

Assessment: FY26 framework articulation deferred to Q4 print + Investor Day. We model FY26 EPS recovery to $3.35-$3.55 on tariff normalization + AIPC trajectory + Future-Ready savings — but the absolute level depends on the FY26 framework specifics.

What They're NOT Saying

1. Specific FY26 EPS guide. Deferred to Q4 print and Investor Day.
2. Specific tariff dollar magnitude per quarter. Qualitative "majority offset" framing without specific dollar quantification.
3. Specific WXP revenue milestone or run-rate. Geographic expansion mentioned but no revenue disclosure.
4. Specific Hybrid Systems weakness magnitude. Acknowledged softness but no quantification.
5. AI-internal-cost-savings specific framework or quantification. Forward-looking commentary without specific targets.
6. Specific Investor Day agenda details beyond "long-term plans." Date and high-level framing only.
7. Specific buyback re-acceleration trigger or timeline beyond leverage threshold. Framework restated but no specific Q4 quantification.
8. Commodity cost trajectory specifics for FY26. No mention of memory or component cost outlook beyond Q4 framing.

Market Reaction

• Pre-print setup: HPQ closed Aug 27, 2025 at ~$26. YTD ~-25% (vs S&P +8%); trailing 30-day +3%; trailing 12-month -15%. Stock has been pressured by tariff overhang since Q2 print.
• After-hours / next-session move: Stock indicated +2 to +4% AH on the in-line print + PS margin recovery + AIPC ahead of plan + Q4 trajectory.
• Volume: Pre-market volume elevated to ~2x average.
• Peers: Dell trading flat to +1%; Lenovo (HK) +1-2%. AIPC narrative supported broadly.

Interpretive read: The Q3 print is a recovery quarter with operational delivery on plan. The market reaction is modest positive — the recovery is largely priced in following the Q2 narrative reset. The Q4 print + Investor Day in early 2026 are the next catalysts. We expect the stock to range-trade $25-$28 over the coming months until the FY26 framework becomes clearer.

Street Perspective

Debate 1: Is the Q3 PS Margin Recovery Sustainable Into FY26?

Bull view: PS margin 5.4% in Q3 demonstrates the mitigation framework is working. Q4 PSOP guide of solidly in 5-7% range implies continued improvement. By FY26 with full tariff mitigation + AIPC mix benefit + Future-Ready savings flow-through, PS margin should trend toward 6%+ midpoint.

Bear view: PS margin recovery may be cyclical rather than structural — continued commodity volatility (especially memory + storage) could pressure margins through FY26. The diversified manufacturing footprint operates at higher unit cost than the consolidated China base, creating residual cost penalty.

Our take: PS margin recovery is structurally credible but commodity-sensitive. We model FY26 PS margin at 5.5-6% midpoint with risk of compression if commodity costs escalate. The AIPC mix benefit provides offset.

Debate 2: Does Print Operating Margin Stay in 16-19% Range Through FY26?

Bull view: Print operating margin near top of 16-19% range in Q3 demonstrates structural cost discipline. The mix shift toward consumer subscriptions + workforce solutions + industrial graphics supports continued margin durability. The hardware market decline accelerating to mid-single-digit in H2 is more than offset by higher-margin recurring revenue.

Bear view: Eventually the volume decline overwhelms cost discipline. The H2 hardware market mid-single-digit decline is steeper than full-year. Supplies revenue will continue declining as installed base ages. Print margin durability has finite limits.

Our take: Print margin holds 16-18% range through FY26, with risk of compression to lower-half of range by FY27 if hardware decline accelerates. The structural cash flow contribution to support capital return + investments remains intact.

Debate 3: Is AIPC Penetration Trajectory Sustainable to 50% by 2027?

Bull view: AIPC mix >25% in Q3 (a quarter ahead of plan) + 100+ ISVs + workload-shifting partnerships with Adobe, Zoom, Microsoft. Combined with Windows 10 EoL driving Win 11 refresh, AIPC adoption compounds. 50% by 2027 is achievable.

Bear view: AIPC adoption may stall if enterprise ROI justifications don't materialize. The application ecosystem is broad but not yet showing clear killer-app momentum. AIPC penetration toward 50% would require sustained NPU workload adoption that's not yet evident.

Our take: AIPC penetration sustainable toward 40-45% by 2027 (vs. 50% target). Even at 40%, the ASP premium + share gain dynamics support continued PS revenue + margin trajectory.

Model Implications & Thesis Scorecard

Model Update

• FY25 estimates (high end of guide): Revenue $54B (+2%); non-GAAP EPS $3.15-$3.20; PS margin ~5.5% (lower half 5-7%); Print margin ~18%; FCF $2.8-$2.9B
• FY26 estimates: Revenue $55-56B (+2-4%); non-GAAP EPS $3.35-$3.55; PS margin ~5.8% midpoint; Print margin ~17.5%; FCF $2.9-$3.1B
• FY27 estimates: Revenue $56-58B (+3-4%); non-GAAP EPS $3.60-$3.85; PS margin ~6%; Print margin ~17%; FCF $3.0-$3.3B
• Long-term framework: Low-single-digit revenue growth; PS margin 5-7%; Print margin 16-19%; ~100% FCF return when leverage permits

Thesis Scorecard

Rating & Action

Maintaining Hold. The Q3 print validates the operational framework from our Q2 initiation — PS margin recovery on plan, AIPC ahead of plan, tariff mitigation largely working, Print margin holding, Future-Ready savings on track. The Q4 guide implies FY25 EPS at high end of $3.00-$3.30 range. Investor Day announced for early 2026. The operational story is clean.

However, the underlying business model remains structurally challenged. Print is a cash cow with multi-year decline. PC market growth limited to mid-single-digit at best. Tariff cost overhang persists at lower magnitude. The cyclical recovery in Q3 doesn't change the secular framework of mature, low-growth, capital-return-driven equity story. The Q3 print doesn't justify upgrading to Outperform.

Fair value range maintained at $26-$32. Stock at ~$26 pre-print. We expect 2-4% positive reaction post-print but the path to material appreciation depends on (a) FY26 framework articulation supporting mid-single-digit EPS growth at minimum, (b) capital return reacceleration, (c) AIPC penetration continuing to inflect, (d) absence of fresh tariff escalation.

What would change our view:

• Upgrade to Outperform: Q4 PS margin in upper half of 5-7%, FY26 EPS guide of $3.45+, capital return reacceleration to $1B/quarter, AIPC trajectory accelerating toward 40% by mid-FY26, Investor Day delivering specific framework for AI-internal-savings.
• Downgrade to Underperform: Q4 PS margin below 5.4% (regression from Q3), FY26 EPS guide below $3.10, commodity cost escalation overwhelming mitigation, AIPC penetration stalling at 25-27%, Print margin compression below 16% range.

Key watch items into Q4 FY25 (November 2025):

• Q4 PS margin trajectory — target solidly in 5-7% range
• FY25 EPS landing — target $3.15-$3.20 (high end of $3.00-$3.30)
• FY26 framework articulation — preliminary commentary
• AIPC penetration trajectory continuing past 25%
• Win 11 refresh momentum into 2026
• Capital return reacceleration as leverage normalizes
• FCF FY25 landing — target $2.8-2.9B
• Commodity cost outlook for FY26
• Investor Day specific date and agenda detail