HP Q1 Earnings Show Strength, Guidance Trimmed
HP Q1 earnings flagged memory-chip inflation and U.S. trade costs that would pressure full-year guidance and sent shares down 3.6% in extended trading.
KEY TAKEAWAYS
- HP reported $14.4 billion revenue and $0.81 non-GAAP EPS in fiscal Q1.
- Management warned memory inflation and U.S. trade costs would keep fiscal 2026 nearer the low end.
- Personal Systems revenue rose 11% to $10.3 billion and AI PCs were over 35% of shipments.
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HP reported fiscal first-quarter net revenue of $14.4 billion and non-GAAP diluted earnings per share (EPS) of $0.81 on Feb. 24, 2026. Despite the strong results, management said rising memory-chip costs and U.S. trade-related regulatory expenses will push full-year results toward the low end of guidance.
Guidance and Cash Flow
HP Inc. (HPQ) maintained its fiscal 2026 outlook, projecting non-GAAP diluted EPS of $2.90 to $3.20, GAAP diluted EPS of $2.47 to $2.77, and free cash flow of $2.8 billion to $3.0 billion, but said it now expects results closer to the low end of those ranges. For the second quarter, the company set non-GAAP EPS guidance of $0.70 to $0.76 and GAAP EPS guidance of $0.52 to $0.58.
The company generated operating cash flow of $383 million and free cash flow of $175 million in the quarter, a 150% increase year over year. It returned $600 million to shareholders through dividends and share repurchases. Shares fell about 3.6% in extended trading at 16:24 ET following the guidance revision.
Costs and Segment Trends
Memory-chip prices for DRAM and NAND roughly doubled sequentially from the first to the second fiscal quarter, now accounting for about 35% of a PC’s bill of materials, up from a historical level near 18%. HP said its outlook incorporates added costs from current U.S. trade-related regulations, with mitigation efforts underway but requiring time to implement. Memory cost volatility is expected to persist through fiscal 2026 and likely into fiscal 2027.
Personal Systems revenue rose 11% year over year to $10.3 billion, with unit shipments up 12%—consumer units increased 14% and commercial units 11%. The segment’s operating margin was 5.0%, and AI-capable PCs accounted for more than 35% of shipments.
Management is pursuing an AI-enabled transformation targeting $1.0 billion in gross run-rate savings by the end of fiscal 2028, with about $300 million expected by the end of fiscal 2026. Operating expenses are forecast to remain roughly flat in dollars for fiscal 2026 as the company works to offset cost pressures.
Karen Parkhill, chief financial officer, said, "we currently anticipate results to be closer to the low end of our range."
