HP (NYSE:HPQ) executives emphasized steady first-quarter execution, continued momentum from the Windows 11 refresh cycle, and expanding adoption of AI-capable PCs, while repeatedly pointing to a sharply rising memory cost environment as a key headwind for the rest of fiscal 2026.
Leadership transition and strategic focus
Interim CEO Bruce Broussard, who has served on HP’s board since 2021, said he has spent his first weeks in the role meeting with employees, customers, and suppliers and working closely with the leadership team. Broussard said the board’s CEO search is “well underway,” with a preference for proven executives who have led large, multi-segment businesses in complex environments. In Q&A, he added the board is taking a broad view of candidates, including potentially those outside the PC and print industry.
Quarterly results: revenue up 7%, non-GAAP EPS $0.81
CFO Karen Parkhill said HP delivered revenue of $14.4 billion, up 7% year-over-year (up 5% in constant currency), with growth across all regions. APJ revenue rose 13% in constant currency, EMEA grew 5%, and the Americas grew 1%.
Gross margin was 19.6%, which Parkhill said reflected an increased mix from Personal Systems and higher commodity and trade-related costs, partially offset by pricing and cost actions. Non-GAAP operating expenses declined year-over-year, helped by expense management and benefits from HP’s Future Ready cost savings program that was completed at the end of fiscal 2025. Non-GAAP operating margin was 6.9%.
With a diluted share count of approximately 932 million, HP reported non-GAAP diluted EPS of $0.81, up 9% year-over-year, at the top end of its guidance range. Parkhill also cited lower net financing expense and lower currency impact as contributors to better-than-expected non-GAAP other income and expense.
Personal Systems: AI PC mix rises; margins pressured by memory
Personal Systems revenue rose 11% on 12% unit growth. Parkhill said the segment benefited from Windows 11 refresh activity, AI PC adoption, and strong consumer performance. Consumer revenue increased 16% on a 14% unit increase, which management partially attributed to demand pull-in aimed at avoiding rising memory prices. In commercial, revenue rose 9% with units up 11%, helped by Windows 11 refresh activity, particularly in EMEA, and AI PC strength. Management also noted large education deals that pressured commercial ASPs even as prices increased to offset higher memory costs.
Broussard said AI PCs accounted for over 35% of PC shipments in the quarter, up from 30% in the prior quarter and 25% the quarter before that. He highlighted the launch of the HP EliteBook G1a, described as an AI PC with intelligence built into the keyboard for hybrid work.
Personal Systems operating margin was 5%, within HP’s guided range but “slightly below expectations,” Parkhill said, given stronger-than-expected consumer and education performance.
Looking ahead, management said the memory environment will likely pressure Personal Systems margins for the remainder of fiscal 2026. Parkhill said HP is aligned with industry experts projecting the PC unit total addressable market will decline “double digits” in calendar 2026 due to industry-wide pricing actions impacting demand. Despite that, HP expects fiscal-year revenue growth in Personal Systems through pricing actions, premium-category share gains, and higher attach of higher-margin offerings, with above-seasonal revenue expected in fiscal Q2 before growth moderates in the back half.
Print: results in line, margins expected near top of range
Print revenue declined 2% year-over-year on lower supplies volumes and market-driven hardware declines. Consumer revenue was down 8% and commercial revenue down 3%, with higher ASPs partially offsetting volume declines. Supplies revenue was down 2% year-over-year in constant currency, but HP said it continued to gain share in supplies while taking pricing to partially offset installed base and usage headwinds.
Management pointed to growth areas within print, including double-digit revenue growth in consumer subscriptions, helped by the ramp of HP’s All-In Plan, and mid-single-digit growth in industrial print. Parkhill said industrial print revenue grew for the 10th consecutive quarter, driven by an ongoing shift from analog to digital production. HP also cited “double-digit growth” in 3D driven by demand in drones and robotics. Print operating margin was 18.3% for the quarter, within the upper half of its long-term range.
For the remainder of the year, Parkhill said HP now expects print operating margins for both Q2 and the full year to be near the top end of its long-term range, supported by profitable unit placement and cost discipline. She said HP continues to expect the print hardware market to decline low single digits in calendar 2026 and expects Big Tank and industrial print growth to help offset the decline.
Memory cost headwinds, mitigation actions, and outlook
Management repeatedly addressed rising DRAM and NAND prices, which Broussard said are increasing input costs across the technology sector and are expected to remain volatile through fiscal 2026 and likely into fiscal 2027. Parkhill said HP saw some memory cost increases in Q1 that were “roughly in line” with what the company outlined at the beginning of the year, but current pricing is up roughly 100% sequentially looking from Q1 to Q2, with expectations for further increases later in the year.
To frame the impact, Parkhill noted HP previously said memory and storage costs were roughly 15% to 18% of a PC bill of materials, but the company now estimates this could be roughly 35% for the year (clarifying in Q&A that this refers to the PC bill of materials). Given the outlook, she said HP expects the Personal Systems operating profit rate to be below its long-term range for the remainder of the year, though the company is not changing its long-term margin framework.
Executives described mitigation efforts across supply, cost, product configuration, and pricing. Broussard said HP has secured long-term agreements covering its memory requirements for fiscal 2026, qualified new suppliers, built strategic inventory positions for key platforms, and cut the time to qualify new material in half. Ketan Patel, who joined the Q&A as the leader of HP’s Personal Systems business, said HP is using “silicon diversity,” offering different configurations including lower-memory options, pursuing design-for-cost initiatives and “decontenting” choices, and shaping demand to available supply while remaining sensitive to demand elasticity. Patel also described different pricing timelines across routes to market, with some changes taking effect immediately and others taking months, depending on contractual structures.
On trade, Broussard said HP is evaluating a recent U.S. Supreme Court tariff ruling and subsequent new tariffs, but the company does not currently expect to be negatively impacted and believes its supply chain provides flexibility.
For guidance, HP maintained its full-year non-GAAP EPS range of $2.90 to $3.20, though Parkhill said the company expects to be closer to the lower end given the “increasingly challenging operating environment” and the time required to fully implement mitigation actions. For fiscal Q2, HP guided to non-GAAP diluted EPS of $0.70 to $0.76 and GAAP diluted EPS of $0.52 to $0.58. HP also maintained annual free cash flow guidance of $2.8 billion to $3.0 billion, with expectations closer to the low end of the range.
Parkhill said operating expenses are expected to be roughly flat year-over-year in dollars for fiscal 2026. She also reiterated a transformation program centered on AI enablement, targeting $1 billion in gross run-rate savings by fiscal 2028, including $300 million by the end of fiscal 2026, with efforts underway to accelerate the program and pursue additional cost actions.
On capital allocation, HP reiterated its commitment to return approximately 100% of free cash flow to shareholders over time, subject to maintaining gross leverage under 2x and considering alternative uses of capital. HP returned more than $600 million to shareholders in Q1 through dividends and share repurchases, including more than $300 million of buybacks, while maintaining higher cash balances to address upcoming debt maturities.
About HP (NYSE:HPQ)
HP Inc is an American multinational information technology company that designs, manufactures and sells personal computing devices, printers and related supplies and services. Its product portfolio spans consumer and commercial notebooks and desktops, workstations, displays and accessories, as well as an extensive line of printing hardware that includes home, office and production printers. HP also provides consumables such as ink and toner, managed print services, device deployment and lifecycle support, and software for device and print management.
Founded from the original Hewlett‑Packard Company, HP Inc became a separately traded public company in 2015 following a corporate split that created Hewlett Packard Enterprise to focus on enterprise hardware and services.
