How does HP approach full-year guidance given memory uncertainty, balancing demand destruction vs. margin protection, and the impact on EPS?

HP's full-year outlook is shaped by stronger H1 revenue, increased memory costs (partly offset by mitigations), and Print margins expected at the high end of their long-term range. The company is taking a prudent view, assuming H1 strength moderates and FY EPS is more H1 weighted. Given current memory assumptions (100% sequential increase Q1 to Q2, further increases), time for pricing implementation, and expected unit demand, HP anticipates being at the lower end of its guidance range. “But at this point, under our current assumptions for memory costs, which do include 100% sequential increase this quarter and some further increases from there. We also take into account price increases that can take time to fully implement and the expected unit demand that we've talked about. So with all of that, we do anticipate being at the lower end of our guidance range.”

Can you elaborate on the demand pull-in in the PS segment, specifically in Consumer vs. Enterprise, and its implications for H2 revenue?

HP observed a moderate demand pull-in in Consumer, particularly in December. However, overall stronger-than-expected revenue growth was primarily driven by fundamental strength in the Windows 11 refresh cycle and increasing AI PC adoption (35% of Q1 shipments, up from 30% prior quarter). Enterprise demand was strong, especially in Europe and Asia, also linked to the Win 11 refresh, which is about 60% complete. Channel inventory remains healthy, indicating robust underlying demand. “We did see a moderate amount of customer demand pull-in in the quarter, particularly in Consumer. That said, we also delivered stronger-than-expected revenue growth, and that was really driven by several key factors including the strength of the fundamentals on the Win 11 refresh and on AI PC adoption.”

Clarify the actual memory pricing impact in Q1 versus forward expectations, and discuss LTA negotiations (volume vs. pricing) and potential supply risks.

Q1 memory cost increases were in line with prior expectations. The 100% sequential price increase refers to the Q1 to Q2 period, with further increases anticipated later in the year. HP maintains strong relationships with suppliers and has secured the necessary supply for its plans. Pricing with suppliers is locked in on a rolling basis to align with demand shaping and pricing strategies, with no current supply risks. “The current prices that are up 100% sequentially are more looking forward. We did have some memory cost increases in Q1, but it was roughly in line with what we had outlined at the beginning of the year. The increases are more going forward.”

HPQ

HP (HPQ) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Jan 2026 (Q1 FY26)· Information Technology· Feb 24, 2026

Source: earnings call transcript

Executive summary

HP Inc. Q1 FY26 — Strong PC Performance & AI Momentum Amidst Memory Cost Headwinds

HP delivered solid Q1 FY26 results, driven by strong Personal Systems performance and increasing AI PC adoption. The company is actively implementing mitigation strategies to address significant rising memory costs, which are expected to pressure PS margins for the remainder of the year. Management remains committed to its Future of Work strategy and long-term financial targets despite the fluid operating environment.

Highlights

Revenue of $14.4 billion, up 7% year-over-year, driven by strong performance in Personal Systems.
Achieved PC market share gains across high-value Commercial and Consumer categories, contributing to double-digit revenue growth in the segment.
Non-GAAP EPS of $0.81, reflecting 9% growth compared to the prior year and at the top of the guidance range.
AI PCs accounted for over 35% of PC shipments in Q1, up from 30% in the prior quarter.
Consumer subscriptions grew double-digit year-over-year, and industrial print grew mid-single digit.

Concerns

Rising input costs, primarily from DRAM and NAND, are expected to remain volatile throughout fiscal '26 and likely into fiscal '27.
PC unit Total Addressable Market (TAM) is projected to decline double digits in calendar year '26.
Personal Systems operating margin is now expected to be below the long-term range for the remainder of the year due to cost pressure.
Full-year non-GAAP diluted EPS guidance of $2.90 to $3.20 is now expected to be closer to the lower end of the range.
Full-year free cash flow guidance of $2.8 billion to $3 billion is now expected to be closer to the low end of the range.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year FY26 Non-GAAP diluted EPS	$2.90 to $3.20 (closer to lower end) high materiality	FY26	Medium
Q2 FY26 Non-GAAP diluted EPS	$0.70 to $0.76 medium materiality	Q2 · FY26	High
Q2 FY26 GAAP diluted EPS	$0.52 to $0.58 medium materiality	Q2 · FY26	High
Full-year FY26 Free Cash Flow	$2.8 billion to $3 billion (closer to low end) high materiality	FY26	Medium
PS Operating Margin	below our long-term range high materiality	remainder of FY26	High
Print Operating Margin	near the top end of our long-term range medium materiality	Q2 · FY26	High
Print Supplies revenue	down low single digit medium materiality	FY26	High
PC unit TAM	decline double digits high materiality	CY26	High
Print hardware market	decline low single digit medium materiality	CY26	High
Non-GAAP OI&E and Corporate Other	roughly flat year-over-year low materiality	remainder of FY26	High
Gross annualized run rate savings from transformation program	$1 billion medium materiality	FY28	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Personal Systems Strong performance driven by Win 11 refresh, AI PC adoption, and strong Consumer segment. Outperformed the market and gained share in premium categories. Operating margin was 5%, slightly below expectations due to stronger consumer and education mix. Unit growth: 12%AI PC shipments: 35% of totalCommercial revenue growth: 9%Commercial unit growth: 11%Consumer revenue growth: 16%Consumer unit growth: 14%	up 11%	11%	—	5%
Print Results were in line with expectations, with an improvement in the rate of market decline. Revenue was impacted by lower supplies volumes and market-driven hardware declines. Solid performance in key growth areas like Consumer subscriptions, 3D, and industrial print. Operating margin of 18.3% was within the upper half of the long-term range. Supplies revenue constant currency: down 2%Consumer revenue: down 8%Commercial revenue: down 3%Industrial print revenue: grew for 10th consecutive quarter3D revenue: double-digit growthConsumer subscriptions: double-digit growth	down 2%	-2%	—	18.3%

HPQ operating KPIs by quarter

HPQ operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Jan 2026 Q1 FY26	Apr 2026 Q2 FY26	Jul 2026 Q3 FY26	Change vs prior quarter
AI PC share of shipments Personal Systems	35%+ This quarter, AI PC is accounted for over 35% and of our PC shipments, up from 30% in the prior quarter and 25% a quarter before. Source: earnings call transcript	44% This includes continued momentum in AI PCs, which increased from more than 35% to 44% of our shipment mix in the quarter, as well as continued strength in Advanced Compute Solutions and Workforce Solutions. Source: earnings call transcript	46% It contributed 46% of our mix, in line with our 40% to 50% forecast for FY '26. Source: earnings call transcript	+2 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
HP EliteBoard G1a	launch	Q1 FY26
HP Digital Passport	launch	Q1 FY26
Workforce Experience Platform (WXP) capabilities	update	Q1 FY26

Deals & partnerships

Microsoft Expanded partnership to embed Microsoft 365 Copilot directly into HP printers.

This partnership aims to improve how employees manage documents on the device, enhancing 'Better Together' experiences.

OpenAI Established an exploratory partnership to pilot OpenAI Frontier.

OpenAI Frontier is a new enterprise platform for building and managing AI agents, positioning HP at the forefront of enterprise AI deployments with built-in governance, security, and observability.

Risks & headwinds

Rising Memory Costs throughout fiscal '26 and likely into fiscal '27

Memory and storage costs made up roughly 15% to 18% of our PC bill of materials and we now currently estimate this to be roughly 35% for the year. Current prices up roughly 100% sequentially (Q1 to Q2).

Mitigation:Secured long-term agreements for FY26 memory requirements, qualified new suppliers, built strategic inventory, expanded lower-cost sourcing, accelerated company-wide productivity efforts, configured products, shaped demand, and implemented targeted pricing actions.

PC Unit TAM Decline calendar year '26

PC unit TAM projected to decline double digits in calendar year '26.

Mitigation:Driving revenue growth through pricing actions, share gains in premium categories, increased attach of higher-margin offerings, and leveraging continued momentum in Win 11 refresh and AI PCs.

PS Operating Margin Pressure remainder of FY26

PS operating margin expected to be below our long-term range for the remainder of the year.

Mitigation:Implementing a combination of product cost actions, company-wide cost actions, and price increases to recover the entire impact over time.

Tariff Uncertainty ongoing

Do not expect to be negatively impacted by subsequent developments following the U.S. Supreme Court ruling on tariffs at this point.

Mitigation:Engaging the administration on these matters and leveraging the strength and agility of the supply chain to navigate the uncertain trade-related cost environment.

What to watch in Q2 FY26

PS Operating Margin Trajectory

next quarter

Current 5% in Q1, expected to be below long-term range for remainder of year

Target Stabilization or signs of recovery towards long-term range

Why it matters

PS operating margin is under significant pressure from rising memory costs, and its recovery is critical for overall profitability.

Given this, we now expect the PSOP rate to be below our long-term range for the remainder of the year, reflecting this additional cost pressure offset in part by mitigation actions.

Find out whether HPQ delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you quantify the memory cost impact in Q1, what's baked into Q2/FY guidance, and if LTAs cover volume and pricing?

Q1 memory costs were in line with expectations, but future increases are significant. Current prices are up ~100% sequentially (Q1 to Q2) and expected to increase further. Memory/storage now constitutes ~35% of the PC bill of materials for FY26, up from 15-18%. PS operating margins are expected to be below the long-term range for the rest of the year. Mitigation strategies include supply management (LTAs for coverage, silicon diversity, low memory configurations), cost actions (commodity basket, design for cost), and pricing/demand shaping. LTAs primarily secure volume, with pricing locked in on a rolling basis.

“We have seen memory costs increase roughly 100% of sequentially, and we do forecast that to further increase as we move into the fiscal year. To put this in a little bit more concrete terms, we did share last quarter that memory and storage costs made up roughly 15% to 18% of our PC bill of materials and we now currently estimate this to be roughly 35% for the year.”

asked by Sreekrishnan Sankarnarayanan · answered by Karen Parkhill

2 min read 6 chapters

Detailed narrative

CEO Transition and Search Update

Bruce Broussard, interim CEO, highlighted his immersion in the company and confidence in its direction. He acknowledged Enrique Lores' contributions and confirmed the CEO search is well underway. The board is seeking a leader with a proven track record in delivering shareholder value, navigating complex environments, and managing global, multi-segment businesses.

The previously planned Investor Day for April has been rescheduled due to the ongoing transition.

AI at the Edge Strategy and Innovation

HP is focused on bringing AI to the workplace, emphasizing AI at the edge to enable local compute power for large language models. AI PCs constituted over 35% of PC shipments in Q1, demonstrating rapid adoption. The company launched the HP EliteBoard G1a, its first AI PC with integrated keyboard intelligence, and introduced AI-powered scanning and redaction capabilities in print to simplify workflows for small businesses.

Better Together Experiences and Ecosystem Integration

The company is driving 'Better Together' experiences by integrating devices, software, and services. Q1 saw the launch of HP Digital Passport, a personalized hub centralizing information across the HP ecosystem to enhance customer engagement. Additionally, HP expanded its partnership with Microsoft, embedding Microsoft 365 Copilot directly into HP printers to streamline document management.

Empowering CIOs with WXP and AI Partnerships

HP introduced multiple enterprise-focused updates to its Workforce Experience Platform (WXP), which now serves as a comprehensive multivendor fleet management solution for PCs, print, and collaboration. WXP processes over 1 terabyte of data daily from 50 million endpoints, providing predictive insights for IT teams.

HP also established an exploratory partnership with OpenAI to pilot OpenAI Frontier for enterprise AI agent deployments, focusing on governance, security, and observability.

Memory Cost Mitigation Strategies

To address rising DRAM and NAND costs, HP is implementing a multi-pronged mitigation strategy. This includes securing long-term agreements for FY26 memory requirements, qualifying new suppliers, building strategic inventory, and accelerating product configuration changes. On the cost side, HP is expanding lower-cost sourcing, optimizing logistics, and driving company-wide productivity efforts to offset the impact. Targeted pricing actions and demand shaping are also being employed.

Tariff Impact and Supply Chain Agility

HP is evaluating the impact of the recent U.S. Supreme Court ruling on tariffs and subsequent developments. At this point, the company does not expect to be negatively impacted and is engaging with the administration on these matters. Management expressed confidence in the strength and agility of its supply chain, which provides the necessary flexibility to navigate an uncertain trade-related cost environment.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.