We are pleased with our third quarter results, especially in light of our overall market and macro context.
Our performance reflected the company's multiple profit levers, execution agility and resiliency.
Third quarter net revenue was $14.3 billion, down 2% year-on-year or flat in constant currency.
As expected, we saw growth in Personal Systems revenue and declines in print revenue. Regionally, in constant currency, APJ increased 5%, EMEA increased 2% and Americas declined 4%. Gross margin was 16.7%, down 320 basis points year-on-year. The decline was due to a combination of a higher Personal Systems mix, a higher consumer mix within Personal Systems and the lower print rate driven by volume. Non-GAAP operating expenses were $1.5 billion, down $274 million year-over-year. The OpEx decline is driven by our ongoing cost reductions program, as part of our transformation efforts as well as a reduction in discretionary costs. Non-GAAP net OI&E expense was $42 million for the quarter. We delivered non-GAAP diluted net earnings per share of $0.49 with a diluted share count of approximately 1.4 billion shares. Non-GAAP diluted net earnings per share, excludes a net benefit totaling $32 million related to non-operating retirement related credits and other tax adjustments, partially offset by amortization of intangible assets, debt extinguishment costs and restructuring and other charges.
As a result, Q3 GAAP diluted net earnings per share was $0.52.
Turning to segment performance. In Personal Systems, we deliver another strong quarter, growing share, revenue and profit dollars. The business demonstrated its resiliency following the impact of COVID on supply chain issues in fiscal Q2. In Q3, Personal Systems benefit from strong demand related to working and learning from home with revenue up $10.4 billion, up 7% or 9% in constant currency. Drilling into the details by customer segment. We saw different results with consumer revenue up 42%, while commercial revenue was down 6%. By product category, again the results deferred. Revenue was up 30% for notebooks, down 29% for desktops and down 30% for workstations. The change in mix reflects the strong demand for notebooks, mainly in Chromebooks from the educational and consumer markets, respectively as the shift to working and learning from home continues. Operating margins remained high at 5.5% and operating profit dollars were up year-on-year to $570 million, representing a 54% of HP's segment profitability. This is the 11th consecutive quarter of operating profit dollar increase, as the team has effectively navigated headwinds and tailwinds during this time. In print, we had anticipated a challenging quarter, given the COVID impact on our commercial business. And the team demonstrated agility and strong execution, meeting or exceeding our expectations.
Importantly, HP remains uniquely well positioned in the print market, by being leaders across both the home and office with longer-term growth opportunities across our industrial categories. This creates opportunities in this current environment and beyond, to address the changing and holistic customer needs, by providing innovative, secure and strong ROI value propositions across geographies and customer segments.
Looking at Q3 demand, as we expected, we saw a decrease in commercial print across our office and graphics businesses. This includes a negative impact to both hardware and supplies, as many businesses remain closed and office workers continue to work from home in many geographies.
On the other hand, in our home printing business, we continue to see strong demand coming from work from home.
As a result, consumer hardware revenue grew 7% and units increased 3% and commercial hardware revenue declined 37% and units declined 32%.
Third quarter supplies revenue was $2.6 billion, down 18% in constant currency as office and graphics printing were significantly impacted by the COVID-19 restrictions. Overall in Q3, the team remained disciplined in managing channel inventory, keeping Tier 1 channel inventory levels below the ceiling. In total, Q3 print revenue was $3.9 billion, down 20% nominally and 19% in constant currency. And print operating margins were 12.2%, which included a full quarter impact of office closures in the commercial print and the corresponding volume declines. Operating profit dollars were $480 million. In general, we saw improvement in commercial print usage through the course of the quarter as well as our factories back to more normalized levels. Therefore, we remain confident that Q4 operating profit dollars and margin rate will improve sequentially and that as volumes increase, our operating margins will return to our long-term target of 16% to 18% over time.
Let me now turn to our transformation efforts and specifically our cost savings actions and opportunities ahead.
Importantly, we are making good progress on our announced plans.
We are currently tracking well ahead of plan in our 3 year program to achieve $1.2 billion in gross run rate structural cost reductions. To illustrate, we've seen significant operating expense reductions throughout the year with Q3 non-GAAP OpEx as a percentage of revenue at 10.6%.
As we continue to generate savings, we are at the same time focused on improving effectiveness and speed.
As an example, we have seen a positive impact driven across or centralized commercial organization and corresponding supply chain teams. Where in recent quarters, we improved the speed and flexibility required to navigate the highly dynamic supply and demand changes across the globe.
We are also making investments, especially in digital, which will help our overall customer, partner and employee experience in the quarters and years to come.
During this dynamic environment, we are continuing to reduce discretionary costs as much as possible.
While these discretionary reductions can be more temporary than structural, we will continue to focus on driving a lean cost structure to help us navigate. Shifting to cash flow and capital allocation, Q3 cash flow from operations and free cash flow were strong at $1.7 billion and $1.6 billion, respectively, which help strengthen our revised full-year outlook. In Q3, the cash conversion cycle was minus 30 days. Sequentially, the cash conversion cycle is down four days, driven by more normalized purchasing and sales linearity, including decreases in days payable outstanding, days of inventory and days sales outstanding. In Q3, HP raised $3 billion of senior unsecured notes. This is our first corporate debt raise, since 2014 and is consistent with our capital structure strategy, communicated earlier this year. The proceeds have many benefits, including creating capacity to make disciplined returns based capital allocation decisions, including share repurchases.
Moving to our debt maturity curve, including retiring approximately $1.6 billion of 2020 and 2021 notes, along with short-term commercial paper. And in the near term, during this dynamic period, providing additional balance sheet prudence. These actions incorporate our commitment to an investment-grade rating.
Importantly, we are committed to a robust dividend and share repurchase program. We returned $953 million to shareholders, through share repurchases and $251 million via cash dividends in Q3.
For reference, these actions equates to buying back roughly 4% of HP shares in Q3 alone. Year-to-date we have returned a total of $2.5 billion, which represents 121% of free cash flow.
Looking forward, in the near term, we expect to continue being active in the market and buy back shares at elevated levels in the range of approximately $1 billion per quarter at minimum. Heading into Q4, keep the following in mind related to our overall financial outlook.
We expect macroeconomic conditions to remain uncertain, as we continue to monitor the dynamics of the COVID-19 pandemic.
Turning to specific Personal Systems assumptions.
We expect continued strong demand in consumer and education with more caution and commercial, particularly desktops and workstations.
We expect industry-wide CPU and panel constraints to negatively impact our ability to meet demand, especially for notebooks, which were constrained top-line growth.
We expect the cost from the overall basket of commodities to be similar compared to Q3 levels. From a margin perspective, we would expect Q4 operating margins to be lower compared to Q3, driven by mix changes, but still be in the upper half of our 3.5% to 5.5% long-term operating margin target range. In printing, we expect Q4 to improve relative to Q3. This includes units, total revenue, supplies revenue, profit dollars and margin rate.
We expect that our supply chain impacts mainly related to the earlier factory closures in Southeast Asia to be largely mitigated. From a demand perspective, we are still expecting commercial print to stay at depressed levels, with positive demand coming from home printing. Taking these considerations into account, we are providing the following outlook.
We expect Q4 '20, non-GAAP diluted net earnings per share to be in the range of $0.50 to $0.54 and Q4 '20 GAAP diluted earnings per share to be in the range of $0.32 to $0.36. GAAP EPS includes the cost of restructuring, tax adjustments and one-time defined benefit plan settlement charges.
We expect FY '20 non-GAAP diluted net earnings per share to be in the range of $2.16 and $2.20. And FY '20 GAAP diluted net earnings per share to be in the range of $1.83 to a $1.87.
We expect FY '20 free cash flow to be in the range of $2.5 billion to $3 billion. And now I would like to hand it back to the operator and open the call for your questions.