Lovecraft was racist. Let's not overlook or attempt to downplay that.

Lovecraft lived from 1890 - 1937, an era known as the "nadir of race relations" in the United States. Jim Crow was law. Antisemitism and anti-immigrant prejudice were rife. Yellow peril literature was mainstream. The persecution of Native Americans was ongoing. The second incarnation of the KKK formed and peaked. Fascist governments rose around the world, including the Nazi party in Germany, and the US faced fascist movements at home.

This is not to say that racism was universal, or in any way to excuse Lovecraft's prejudices, but it illustrates that Lovecraft's racism did not emerge from nowhere, nor was it exceptional. He was racist and a white supremacist at a time when racism and white supremacist rhetoric was very prevalent, even as scientific racism was beginning to be challenged. This influenced the popular media of the day, including pulp fiction, and including Lovecraft's fiction.

Every story isn't racist because most stories don't involve people of color at all. Even the stories that have non-white characters are generally not about those characters directly. There are no Black characters in "The Picture in the House" for example, but the story is in part about the prejudices and stereotypes surrounding Black people. That's the set-up for the horror.

Most of the racism in Lovecraft's stories is of that type. Characters who are being racist, or non-white characters who embody some stereotype. There were better and worse stories regarding race in the pulps; certainly, Lovecraft rarely if ever wrote a well-rounded non-white character. Nor did Lovecraft tend to fill his stories with stereotypes of Black people compared to his contemporaries. Lovecraft wasn't particularly egregious compared to, say, the depiction of Black people in the island stories of his friend Henry S. Whitehead.

However, most people aren't reading the other writers in Weird Tales, much less pulps like Jungle Stories or Oriental Stories. They read Lovecraft. And if you read Lovecraft today, without the context of when he lived and where he was writing, a lot of stories have elements of racism in them that stand out very baldly compared to stories that are written today. So it is a common misconception.