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Good day, everyone, and welcome to the third quarter 2025 HP Inc. Earnings Conference Call. My name is Krista, and I will 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. 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. I would now like to turn the conference over to Orit Keinan-Nahon, 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, and Karen Parkhill, 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 investors.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 reports, 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 amount 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 one 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 would now 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, AITC 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 growth annualized savings of $2 billion by the end of fiscal year 2025, 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 could. 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 continue to shift our mix to higher-value segments such as AITCs, 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 AIPC adoption. 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. Consumer growth was supported by a strong back-to-school season. In our key growth areas, we delivered 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 softer 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 us 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

Thank you, Enrique, and good afternoon, everyone. We are pleased with the progress we've made in the quarter to advance our strategy to lead the future of work while navigating an evolving market environment and delivering on our financial commitments. We drove another quarter of solid revenue growth, with continued momentum in personal systems fueled by AIPC and Win 11 refresh activity and strong performance in our key growth areas. In fact, we delivered double-digit sequential growth in personal systems, resulting in strong free cash flow in the quarter. In print and PS, 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. Taking a closer look at the details of the quarter, net revenue was up 3% year-over-year, both nominally and in constant currency, with growth across all regions. In constant currency, Americas and EMEA each grew 1%, and APJ was up 11%, with particularly strong personal systems performance in China. Gross margin was 20.5%, down year-over-year with a higher mix from personal systems, increased trade-related costs, and unfavorable currency impacts. We offset those headwinds in part with disciplined pricing actions and cost management. As anticipated, non-GAAP operating expenses were up year-over-year. We drove our future-ready cost plans and maintained strong expense management while importantly investing in growth with key strategic and go-to-market initiatives. All in, our non-GAAP operating margin was 7.1%, down year-over-year and in line with our expectations. Finally, with a diluted share count of approximately 954 million shares, our non-GAAP diluted net earnings per share was $0.75, and our GAAP earnings per share was $0.80, helped by favorable tax adjustments in the quarter. Now let's turn to segment performance. We delivered our sixth consecutive quarter of solid growth in personal systems, with revenue up 6% above our expectations on 5% unit growth and increased ASPs. We continue to shift mix toward premium categories while executing disciplined pricing actions to help mitigate cost increases. Sequentially, revenue was up 10% and units were up 13% on seasonal strength and overall share gains. And momentum continued in our key growth areas, with strong performance in AIPCs, advanced compute, and workforce solutions, offset in part by softness in hybrid systems. We drove commercial revenue up 5% on 3% unit growth, with favorable pricing and a mix shift toward premium. Consistent with our strategy, we gained share in Windows-based commercial PCs as refresh activity fueled by Win 11 and AIPCs continued. Consumer revenue and units grew 8%, with strong performance in North America, along with China driven by gaming. And robust back-to-school seasonality and share gains drove consumer units up 34% sequentially. Importantly, as promised, we drove personal systems operating margin back into our guidance range at 5.4% with our planned mitigation actions. Turning to print, 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. In this dynamic environment, we maintained our focus on profitable unit placement, prioritization of higher-value categories, and disciplined cost management. We also drove strong performance in key growth areas, including double-digit growth in consumer subscriptions and strong performance in industrial, fueled by double-digit hardware growth. Looking at the details, print revenue declined 4% year-over-year, or 3% in constant currency, with market-driven hardware declines in both consumer and commercial. Supplies performed as expected, down 3% in constant currency, and we continue to drive market share gains and favorable pricing that partially offset installed base and usage headwinds. 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. Turning to our future-ready cost plans, we are pleased with the progress we have made to drive greater efficiency and effectiveness across the company. This includes leveraging AI capabilities internally to drive automation and optimization of processes to better support our customers, partners, and employees. 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. Now let me move to cash flow and capital allocation. 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. Lastly, we returned more than $400 million to shareholders through both dividends and share repurchases. As we signaled at the beginning of the quarter, our leverage ratio remained slightly above our target range, so in line with our stated framework, we limited our repurchase to offsetting stock compensation dilution. Of course, we remain committed to returning approximately 100% of our free cash flow to shareholders over time as long as gross leverage remains under two times and there aren't better return opportunities. Looking forward to the fourth quarter, we will continue to focus on disciplined execution while maintaining the agility needed to respond to changes in a fluid environment. Our Q4 guide takes into account current global tariff rates as well as the market growth expectations that Enrique just covered. By segment, in personal systems, we expect Q4 revenue to be in line with prior year seasonality, driven by the typical holiday uptick in consumer, continued Windows 11 refresh, and AIPC adoption. And we expect personal systems margin to be solidly in our 5% to 7% target range, improving sequentially as the mitigation actions we have taken gain full traction in the quarter. In print, we also expect Q4 revenue to be in line with prior year seasonality and operating margin to be near the top of our 16% to 19% range, reflecting a higher supplies mix along with disciplined pricing and cost management, offset in part by increased trade-related costs. We continue to expect free cash flow to be in the range of $2.6 billion to $3 billion for fiscal year 2025, including approximately $400 million in cash restructuring charges for the year. We expect our non-GAAP tax rate to remain consistent with prior periods. Of note, we appreciate the recently enacted One Big Beautiful Bill Act, which will help keep our tax rate more consistent and enable continued investment and long-term growth opportunities. With all of this, we expect fourth quarter non-GAAP diluted EPS to be in the range of $0.87 to $0.97 and GAAP diluted net earnings per share to be in the range of $0.75 to $0.85. 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. I will share more on our fiscal 2026 outlook on our Q4 earnings call. In closing, we delivered solid results in the quarter while executing well against our strategic initiatives. We are confident that the actions we are taking are the right ones to enable us to respond swiftly to near-term market dynamics while continuing to invest for long-term profitable growth. With that, I would like to hand it back to the operator and open the call for your questions.

Thank you. And we will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. We also ask that you please limit yourself to one question and a single follow-up. And our first questioner today will be from Krish Sankar with TD Cowen. Please go ahead.

Hi. Thanks so much for taking my questions. This is Steven calling on behalf of Krish. I guess the first one for either Enrique or Karen, 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?

Thanks for the question, Steven. 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. As we've said, 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.

I would say we are pleased with the progress we made. As we had said before, this quarter we completed the change of manufacturing on all products going to the US. The great majority of products going to the US are not built in China anymore. We also did additional cost actions, and we did selective price increases. Overall, we made good progress, and this is why we are confident in our ability to mitigate tariffs down the road as we will continue to execute on these plans.

Great. Thank you for that. And as my follow-up, one question on the print business. I guess, anecdotally, 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. I guess, can you talk about any expectations perhaps going into fiscal 2026 on whether some of these return-to-office initiatives might have a delayed growth impact into next year perhaps, or is there some different dynamic about return-to-office initiatives in terms of spending on supplies and commercial hardware? Thank you so much.

Yeah. Thank you. 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. Which means that down the road, we will see the demand for printers come back because customers continue to print, and there has not been a deviation there, which is in line with the return-to-office assumptions that we were making. So short-term impact on our hardware, but no impact on supplies, which means in the long term, the business will come back as companies will have to build new hardware to complete or to make sure that employees are having the right experience.

Your next question comes from the line of Amit Daryanani with Evercore ISI. Please go ahead.

Hi. Thank you for the question. This is Irvin Liu calling in for Amit. 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?

Yes. So let me confirm that 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, and we are seeing more and more applications taking advantage of the new capabilities that AIPCs have. 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.

Got it. And then I have one for Karen as well. 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.

Yes. Thanks for the question, Irvin. We are seeing good momentum heading into the fourth quarter. And in PS, we do expect sequential revenue growth in line with the prior year seasonality. And that's really driven by the continued momentum in the Win 11 refresh and AIPC adoption, as well as we've got the holiday uptick in consumer that we expect to happen strongly. I'd say more importantly, though, we do expect the PS operating rate to continue to improve as we continue to work to offset the headwinds of trade-related costs and commodity costs. And in print, we also expect sequential revenue growth in line with prior year seasonality. And sequential operating profit improvement to the top of our 16% to 19% target range, and that's really driven by seasonally higher supplies volume. So we're confident in our Q4 guide.

And to complement that, we also will see a bigger impact of some of the actions we took around tariffs. Some of the new tariffs were put in place at the end of last quarter, beginning of this quarter, and this we will continue to mitigate as time comes.

Understood. Thank you for the color.

Your next question comes from the line of David Vogt with UBS. Please go ahead.

Hey, guys. Thanks for taking my questions. So maybe we go back to the PC market because I think, Enrique, you mentioned you expect normal seasonality in the PC market. And I guess what I'm struggling with a little bit is you've had incredibly strong growth the two quarters. And if I think about your business over the years, generally speaking, you don't have that degree of strength for, call it, in a row sequentially. Can you just maybe expand upon what gives you confidence in this guide? And I think you also mentioned strength in, I guess, momentum into next year. And I know you mentioned AIPC and, obviously, some other Windows 11 refresh dynamics, but a little bit more color there would help. And I'll give you my second question at the same time. And so maybe you can just help us understand kind of the margin dynamic within print a little bit better. I know last quarter, you had the, grant. This quarter, obviously, mix and some pricing dynamics probably hurt margins. Can you maybe walk through kind of what's going to reverse a little bit in the October quarter to help get us back towards the upper bound of that range from a print perspective? Thanks.

Okay. So let me take the first question, and Karen will take the second question. In terms of PC demand, I think there are different things to have in mind. First of all, Q4 versus Q3, in the consumer side, there is always an increase of demand driven by completing the back-to-school cycle and also preparing for holidays. And this always drives a sequential improvement. In the commercial side, we expect to continue to see two major drivers of growth. One is the Windows 11 refresh, and second is the AIPCs. In Windows 11, year-on-year and quarter-on-quarter, we see an improvement in the funnel, meaning the funnel at the beginning of Q4 is higher than it was at the beginning of Q3, and also bigger than what it was at the beginning of Q4 last year. And Windows 11 is playing a key role there. Second, what is also very important to assess long-term sales, when we look at where we are in the cycle, our estimate is that slightly more than 50% of the installed base has been converted to Windows 11, which means there is still going to be a positive impact not only in Q4 but also in the earlier quarters of next year. And this is why we think the demand for PCs is going to continue in Q4. We projected that the growth of PCs will be mid-single digits for the second half and that there will be growth in fiscal year 2026.

And on the margins, we're confident in our sequential improvement in print margins. In our Q3 print operating margin at 17.3%, was solidly within our guidance range and in line with our expectations. You know, we typically have lower supply sales in the summer months, and that can cause some seasonality in the margin. But as we look into Q4, we do expect the print margins to be at the top end of our range. And that's reflecting some higher supplies volumes, as we saw very similar to last year, along with disciplined pricing and cost management. I know you also mentioned the grant last quarter. We did see a grant last quarter from the EDB that had a bit of a catch-up from the beginning of the calendar year to be booked in the quarter. But it is a multiyear grant, and we are continuing to receive that grant this fiscal year and into future fiscal years.

Great. Thanks, Enrique. Thanks, Karen.

Your next question comes from the line of Wamsi Mohan with Bank of America. Please go ahead.

Yes. Thank you so much. I guess, Enrique, or Karen, I know you spoke up quite a bit about print margins just now, but I normally think of print margins to be that volatile, but you just dropped 100 plus basis points on print margin sequentially, and it's going to bounce back next quarter. And Enrique, you made some comments on sort of where you're emphasizing and deemphasizing certain parts of the portfolio as well. So if you were to pull those together and we think and we fast forward beyond sort of fiscal Q4, are you thinking that the range for these print margins is sort of going to be in this long-term range that you've given because you seem to be tracking at the higher end even above the higher end in quite a few quarters. And some of the cost actions that you're taking, should we just be calibrating towards a higher range for print margins?

Let me make a couple of comments. First, in terms of the changes quarter over quarter, what we are seeing this year is very similar to what we saw last year. As Karen mentioned before, the biggest impact in Q3 was driven by the mix of supplies, that was lower compared to Q2 and is lower compared to what we expect to see in Q4, and this really has a big impact. And again, we saw very similar performance a year ago. So we don't think it's out of what we have seen in previous cases. In terms of the projections long term, we are not changing our projections from what we have been seeing before. We continue to maintain the ranges that we have seen. As we have said before, having these ranges gives us the opportunity in a given country, in a given quarter, to be more aggressive placing units if this is what we decide to do because we see that they will be profitable units. We have done this in the past, and we want to have the ability to do that without getting out of the ranges that we have. In terms of the actions that we're taking for the print business going forward, they are very consistent with conversations we have had in the past, Wamsi. We are going to continue to drive in the consumer space to achieve more profitable units, especially big tank. We are going to continue to drive improvements to capture more lifetime customer profitability by shifting the business to subscriptions and services. We see opportunities to grow share in profitable office categories, and we see an opportunity to drive growth in the industrial side, but we have done in that we have driven in the past, we will continue to do. And, of course, we are going to be very disciplined managing our cost structure and looking for any opportunity we have to improve productivity and increase efficiency. So it's very consistent with the plan that you have seen us executing before. And we will continue to do that going forward.

Okay. Thanks, Enrique. And if I have a follow-up just on PCs. If you look at industry expectations, there is below normal seasonality based on, you know, it'd be ODM builds or other things that in this third parties that we can look at. Below normal seasonal trends in the back half of this year and then even projections for a decline. You're kind of saying something very different, which is, you know, sequentially consistent with prior years and then growth next year. So the implication here that HP is taking share? If you are, where is that coming from? Any particular regions, any particular players? And where is that success maybe coming from?

There are two comments. One is our projections are consistent with what we are seeing in the market. And we have seen strong commercial demand in Q3, have seen strong consumer demand. And as I mentioned before, we don't think this is a pull-in of demand. We think this is real demand because it's not only happening in the US, we are seeing this across multiple countries and across multiple geographies. In terms of our projections going forward, they rely on the fact that we continue to see strong demand for AIPCs, strong demand for Windows 11. And something I didn't mention before is also the fact that we expect ASPs to continue to grow because of stronger demand and stronger growth in premium categories, which has been our strategy in the previous quarters and will continue to be going forward. So answering your question on share, you know that our goal and our objective is not to grow share for the sake of gaining share, it's to drive profitable growth. What we have been doing in the last quarters is growing share in the more premium segment of commercial consumer AIPCs, and this is going to continue to be our strategy going forward.

Okay. Thanks, Enrique.

Your next question comes from the line of Michael Ng with Goldman Sachs. Please go ahead.

Great. I just have two as well. One for Enrique on print and one for Karen just on capital allocation. Enrique, print, you guys have talked a little bit about the aggressive pricing environment, the demand in office. Softer than expected in North America and Europe. As you look out to, you know, the rest of this year and into next, was wondering if you could just talk about your expectation on those two things, pricing and the office environment, and whether you see that becoming better or worse in the next couple of months, in the next year or so. And then, Karen, I just wanted to ask for a clarification. Are we at the point from the gross leverage standpoint? I think you guys are below two now. Where you guys will return 100% free cash flow to shareholders as soon as next quarter? And I just wanted to ask if you could clarify. When you guys talked about the revenue guidance for the segments, was that consistent with prior years? Or typical years? I feel like you may have said both. I just wanted to clarify that. Thank you.

Okay. Let me start on the question on print demand. So at this point, what we are expecting or what we are building in the plans is a similar market behavior to what we have seen in Q3. Many of our competitors announced price increases as a consequence of the trade-related cost. What we have seen in the market is that these price increases didn't materialize in the competitive space. So we are expecting that this aggressive price competition is going to continue going forward. We think it's connected to the fact that the market was smaller, and therefore, there was more pressure on the price side. But as I said before, we think this is going to be temporary. We have not seen a change in the fundamental variable, which is the number of pages printed, which gives us confidence in the future. And in terms of 2026, it's early to give you a lot of detail. We will in the coming quarters, in the coming months, as we do more work to estimate what will be the demand for next year.

Yep. And, Michael, on your second question on capital allocation, our leverage did improve from Q2 where it was slightly over 2.2x and improved in Q3 to just be slightly over two times, at 2.04 in Q3. And that was driven by improved EBITDA and the repayment of a debt maturity that we had in June. While it could remain slightly elevated, we do expect it to continue to improve in FY '26. So we do anticipate more repurchase activity soon. And I would say, should we continue to operate at higher leverage levels, we would use cash to reduce debt as bonds mature. That would also enable us to repurchase stock as well.

Your next question comes from the line of Erik Woodring with Morgan Stanley. Please go ahead.

Hi. Good afternoon. This is Maya on for Erik. Enrique, maybe if we start with you, could you maybe elaborate a little bit on your AIPC comments? When we speak to CIOs or channel partners, we don't hear as much enthusiasm for AIPCs, but clearly, your comments prove otherwise. So can you just please unpack maybe the industries you see adopting AIPCs or regions that are particularly strong, and then what are the key use cases you're hearing that are driving this AIPC adoption?

Yeah. And I think it's really my comments are driven by what we see in actuals. As I said, in the prepared remarks, our mix of AIPCs today is more than 25%, and this is the goal that we had for Q4, for the end of the year. So we are one quarter ahead of our original target, which shows the demand that we see. I think the key thing behind the AIPCs is the fact that over the next quarters, more and more software applications are going to take advantage of the capabilities that the AIPCs have. And we have started to see it now, and we expect that it will continue. For example, we have now Adobe and

Great. Thank you. And then, you know, I know you mentioned that we're a little over 50% of the way through the Windows 11 refresh. You know, if we think about the SMB category, do you see them adopting more of that twelve-month extended support that could come back and refresh in 2026? Or kind of how do the trends differ by underlying customer segments?

Yeah. I think it's a good question. So first of all, when we look at the total conversion, we are behind what we have been in other years. You know, sorry, in previous refreshes, this is why we think this process is going to be extended. When we look at the penetration in enterprise versus SMB, this is very consistent with what we have seen before. The changes are in enterprise, and over time it takes in SMB. This is what is happening this year, which is very consistent with previous refreshes. So we see a bigger opportunity in SMB going forward, which, again, is very consistent with previous refreshes that happened before.

Great. Thank you.

Your next question comes from the line of Alek Valero with Loop Capital. Please go ahead.

Hey, guys. This is Alek on for Ananda. Thank you for taking my questions. Just very quickly on the poly business, is there anything that you could update us on? Are you seeing any noticeable pickup or increased certainty in enterprise and corporate spending?

Thank you. We mentioned in the prepared remarks that this was not a strong quarter for what we call hybrid systems. We have seen companies, especially in Europe, especially in the headset space, deprioritizing some of these projects versus PCs or versus AI. So we have seen an impact in the short term. We continue to think that this is going to be or this is a very important business for us going forward. And we continue to invest not only on the headset space, also in the video side. We announced a very innovative solution on 3D video collaboration that we did with Google. And we are going to continue to invest in this category. On the other side, on the gaming side, similar categories, we have seen very strong growth this quarter. This is driven by HyperX. So on that side of the peripheral space, we had a strong quarter.

Very helpful. And just a quick follow-up. As part of your refresh initiative, is there any specific part of product lines that you are eyeing to refresh?

Is the question on PCs or really across the full portfolio?

Yeah. Just across the full portfolio.

I mean, the answer is yes. Across the board, we continue to invest very significantly in R&D. Innovation is a key part of how we win and how we compete. And next year, there will be refreshes across the PC portfolio, both in the consumer side, in the commercial side, in the workstation space, and many of the key areas of printing. So lots of innovation is coming. We mentioned a bit of that of what we did in Q3, but the next quarters are going to be very exciting from an innovation perspective.

Super helpful. Thank you, guys.

So I think it was the last question. So in closing, let me reiterate a few of the key points that we have been making. First of all, we are executing with discipline in an environment that continues to be dynamic. Second, we expect to continue to see momentum in the refreshed catalyst driving growth in the PC market. As I just mentioned, we are innovating to be a leader in the future of work, and we remain very energized by the opportunities that we see ahead. And before we wrap the call, I want to share that Orit will be moving to a new role as my new chief of staff. And I want to use this opportunity to thank her for her leadership as global head of IR. Her financial insight, sound judgment, and guidance have been invaluable to HP, to me, and to Karen, and we look forward to her continued strong contribution in her next role. And I am also pleased to welcome Alok Yao, our new global head of IR. With more than a decade at HP, including his recent role as CFO of our personal systems business, Alok brings deep expertise and a clear understanding of our operations. And he is very well positioned to support our investor relationships and contribute to HP's long-term goals. So thank you to both, and thank you to all of you for attending today's call. Thank you.