HP (HPQ) Q2 FY26 earnings call: guidance and Q&A

Asked about the sustainability of PS margins given rising memory costs, and whether future offsets would come from cost reductions or price increases.

Management expects PS margins to be below the long-term range for the rest of the year, with Q4 being a low point, followed by sequential improvement into FY27. They continue to drive cost reductions and leverage supply chain scale, silicon diversity, and demand shaping.

“But that said, we are actively executing our mitigation actions. And if those actions prove more effective or the environment improves, there could be some upside. I would note, though, that based on what we're seeing today, we would expect Q4 to be a low point, followed by sequential improvement into next fiscal year.”

asked by Samik Chatterjee · answered by Karen Parkhill

Inquired about the extent of pull-forward demand in Commercial PS in H1 vs. durable underlying demand from Windows refresh and AI PC transition.

Management estimated roughly 2% to 3% of Q2 Commercial PS revenue was due to pull-forward demand. They highlighted intrinsic strength from Windows 11 refresh (30% installed base remaining) and the long-term opportunity of AI at the edge driving premium PC demand.

“There was some pull forward in Commercial PS, as we mentioned, and we estimate that, that added roughly 2% to 3% of revenue.”

asked by Amit Daryanani · answered by Karen Parkhill

Asked if the Q3/Q4 EPS run rate of $0.65 to $0.70 per quarter implies an FY27 EPS of $2.70 to $2.75, and what vectors could drive EPS growth in FY27.

Management stated it's too early to give FY27 guidance but reiterated that Q4 PS margins are expected to trough, with sequential improvement into next fiscal year.

“We are still in our planning process, so it's too early to give guidance for next fiscal year. But I would note that with this increasing cost of memory in Q3 and Q4, we do expect our Q4 PS margins to reach a trough or a low point in Q4, and we do expect sequential improvement in those margins as we move ahead from there.”

asked by Amit Daryanani · answered by Karen Parkhill

Asked about demand elasticity in H2 FY26 and into FY27 given higher pricing and Windows 11 upgrades, and management's visibility into future quarters.

Management expects unit TAM to be down high teens in H2 due to rising prices and Q2 pull-forward, but revenue will be offset by pricing, premium mix, and attach businesses. They see strong underlying demand from Windows 11 refresh and AI at the edge, particularly in premium categories.

“We did say that we are aligned with industry experts out there that we expect unit TAM to be down high teens in the second half. And that's really given the fact that we see this rising price environment along with, for us, the slight pull forward that we had in Q2.”

asked by Erik Woodring · answered by Karen Parkhill

Asked about the Q3 print margin outlook, if Q4 would see a bounce back, and if tariff refunds were included in guidance.

Q3 print margins are expected near the lower end of the long-term range due to seasonality, hardware placement, and increased oil-related costs, but Q4 should see improvement, with full-year margins solidly in range. Tariff refunds are not currently applicable as the government is not processing them for complex multinational companies.

“And on tariffs, we're monitoring the government refund process, which continues to evolve. But currently, the government is not processing refunds for complex multinational companies like us. So of course, when we're able, we will apply for refunds. But at this stage, it doesn't apply to us.”

asked by Wamsi Mohan · answered by Karen Parkhill

Inquired about HP's confidence in securing memory supply for fiscal year 2027, similar to their approach for FY26.

Management is confident in applying the same playbook of strong supplier relationships, long-term agreements, and qualifying new suppliers to secure supply for FY27 and beyond.

“Yes, the way you saw our approach in 2026 of securing memory and storage and even CPUs throughout the fiscal year through our strong supplier relationship and long-term agreements, the same process we will continue to make sure is ahead for '27 and beyond.”

asked by Ananda Baruah · answered by Ketan Patel

Asked about potential ripple effects on CPU supply from data center strength and further commentary on agentic AI for client/edge compute.

HP has secured required CPU supply, managing small core constraints and price increases through silicon diversity and multiple suppliers. For agentic AI, they highlighted the strategic relevance of PCs for edge workloads due to latency, privacy, and cost benefits, showcasing AI PCs, workstations, and security solutions.

“We have known about small core specifically having constraints since the beginning of the year, and we have been working to secure the supply we need. And with our process of moving towards higher-end mix, that supply mitigation is already part of our plans in terms of execution in Q2 and beyond.”

asked by Kinney Chin · answered by Ketan Patel