HP Stock Falls After Earnings. CEO Explains How the Company Avoided a Tariff Hit.

HP expects strong demand for artificial-intelligence-powered-personal computers. (Courtesy HP)

HP Inc. stock fell into the red, undoing the gains that came initially after the company’s earnings report.

Earnings met forecasts, and the company said it expects solid demand for artificial-intelligence-powered personal computers in the months ahead.

HP reported fiscal third-quarter adjusted earnings of 75 cents a share on revenue of $13.9 billion. Analysts surveyed by FactSet were expecting adjusted earnings of 75 cents a share on revenue of $13.69 billion.

“We’re executing with discipline in an environment that continues to be dynamic,” CEO Enrique Lores told Barron’s.

HP also said it expects fiscal fourth-quarter adjusted earnings to be between 87 cents a share to 97 cents a share, compared with analyst estimates of 92 cents a share.

HP shares were down 0.3% to $27.02 in Thursday trading. Shares of competitor Dell Technologies were 1.1% higher.

On top of looking for better-than-expected financial results, investors want to hear how tariffs are impacting companies like HP.

Some tech hardware is exempt from the most hefty tariffs as the Section 232 investigations into electronic products are ongoing, which allows the U.S. government to look into whether or not imports of certain products are a threat to national security. Still, HP isn’t immune to the continuing shifting trade policies.

“We were impacted by the China tariffs, and what we did is we moved manufacturing out from China into other countries, where at this point, there are no tariffs for PCs,” Lores said. “In the print side, we have been impacted by the trade changes across the board by the reciprocal tariffs, and what we have been doing is rebalancing manufacturing into the countries that were more favorable, driving more accelerated cost reductions, and also in some cases, selectively take prices up to compensate for that.”

Shares of HP have dropped 17% this year as Wall Street remains concerned that PC and print demand will take a hit due to higher prices from tariffs. However, Lores told Barron’s that PC demand was stronger than expected in the quarter when it came to consumers, and was in line with estimates for enterprises.

For consumers, HP believes the back-to-school season is “starting strong,” Lores said.

Also, Microsoft’s Windows 10 operating system ends in October. When that happens, technical assistance and software updates will no longer be provided on Windows 10 systems unless customers pay per device for one year. This, along with the introduction of AI PCs, has helped maintain commercial demand, Lores said.

“We think the positive demand is going to continue,” Lores said. “AI PCs still have a lot of opportunity to grow.”

Write to Angela Palumbo at angela.palumbo@dowjones.com