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    HPQ
    Earnings call· Jan 2026(Q1 FY26)

    HP Q1 FY26 earnings call HPQ

    Feb 24, 2026 Source

    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

    5

    • 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

    5

    • 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

    11
    CategoryTargetConfidence
    Full-year FY26 Non-GAAP diluted EPS
    $2.90 to $3.20 (closer to lower end)
    high materiality
    Medium
    Q2 FY26 Non-GAAP diluted EPS
    $0.70 to $0.76
    medium materiality
    High
    Q2 FY26 GAAP diluted EPS
    $0.52 to $0.58
    medium materiality
    High
    Full-year FY26 Free Cash Flow
    $2.8 billion to $3 billion (closer to low end)
    high materiality
    Medium
    PS Operating Margin
    below our long-term range
    high materiality
    High
    Print Operating Margin
    near the top end of our long-term range
    medium materiality
    High
    Print Supplies revenue
    down low single digit
    medium materiality
    High
    PC unit TAM
    decline double digits
    high materiality
    High
    Print hardware market
    decline low single digit
    medium materiality
    High
    Non-GAAP OI&E and Corporate Other
    roughly flat year-over-year
    low materiality
    High
    Gross annualized run rate savings from transformation program
    $1 billion
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    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%

    Operational metrics

    14
    Revenue
    $14.4 billionup 7% year-over-year
    Q1 FY26

    driven by performance in Personal Systems

    Non-GAAP EPS
    $0.81up 9% year-over-year
    Q1 FY26

    at the top of our guidance range

    Non-GAAP Operating Margin
    6.9%
    Q1 FY26
    Gross Margin
    19.6%
    Q1 FY26
    Non-GAAP Operating Expenses
    down year-over-year
    Q1 FY26
    Diluted Share Count
    932 million
    Q1 FY26

    approximately

    Cash Conversion Cycle
    improved sequentiallysequentially
    Q1 FY26
    Capital Returned to Shareholders
    over $600 million
    Q1 FY26
    Share Repurchases
    over $300 million
    Q1 FY26

    part of total capital returned

    Gross Leverage Ratio
    slightly above target
    Q1 FY26

    target is under 2x

    PC Bill of Materials (Memory & Storage)
    roughly 35%up from 15% to 18% previously
    FY26

    current estimate for the year

    PC Bill of Materials (Memory & Storage) Price Increase
    roughly 100%sequentially
    Q2 FY26

    current prices, expected to further increase

    Win 11 Refresh Cycle Completion
    about 60%to date
    Q1 FY26

    still more to go

    Print Global Market Share
    33.5%
    Q1 FY26

    #1 leader

    Industry KPIs

    8
    MetricValueDetails
    Capital return FCFover $600 millionUSD
    Unit shipments ASP12% unit growth%
    Gross margin drivers19.6%%
    Services peripheral attach1/3of PS margins
    Long term supply agreementssecured
    Component supply constraintsrising prices of DRAM and NAND
    Installed base refresh runwayabout 60%%
    Revenue mix by end market segmentAPJ revenue up 13% constant currency; EMEA up 5%; Americas up 1%%

    Product announcements

    3
    ProductTypeDetails
    HP EliteBoard G1alaunch
    HP Digital Passportlaunch
    Workforce Experience Platform (WXP) capabilitiesupdate

    Deals & partnerships

    2
    MicrosoftExpanded 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.

    OpenAIEstablished 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

    4
    Rising Memory Coststhroughout 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 Declinecalendar 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 Pressureremainder 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 Uncertaintyongoing

    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

    5

    PS Operating Margin Trajectory

    next quarter
    Current5% in Q1, expected to be below long-term range for remainder of year
    TargetStabilization 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.

    Q&A highlights

    5

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.