HP Inc.
Can HP keep growing revenue and profit while memory costs push PC prices higher, or will higher prices shrink unit demand faster than pricing covers the added cost?
Last 4 earnings calls · through Q3 FY2026
Bull case
AI PC and premium mix
The bull case is that HP is selling a richer mix of AI PCs, workstations and premium devices, so revenue per unit rises even when unit volumes fall.
Attach and subscription revenue
Peripherals, services and software carry much less memory cost than PCs, and HP keeps adding subscriptions and device management on top of that base.
AI-driven cost reduction
Management is redesigning processes around AI to take out cost, and those savings are meant to absorb part of the component increase rather than relying only on price.
Guidance raised through the year
HP has beaten its own earnings guidance for three straight quarters and raised the full-year range, which supports the view that pricing and mitigation are working.
Bear case
Shrinking PC unit demand
The bear case is that PC prices are rising fast enough to shrink unit demand by a high-teens rate in the second half, leaving revenue growth resting on price alone.
Memory cost inflation
Memory and storage now take a much larger share of a PC's build cost, and HP expects those costs to keep rising into the next fiscal year even as it reprices.
Personal Systems margin erosion
Personal Systems margins have fallen below management's own long-term range, and the trough is still ahead now that cheap inventory has been used up.
One-time tariff refunds
Part of the latest earnings and of the raised outlook comes from tariff refunds that will not repeat, so underlying earnings power is lower than the headline suggests.
Bull and bear points
Growth & Execution
In short: AI PC and premium mix are lifting revenue per unit, while higher prices are shrinking the number of PCs sold.
AI PC mix climbs toward half of HP's shipments
AI PCs carry higher prices and pull through attach sales, so each shipment earns more. Management expects the mix to reach 60% to 70% next fiscal year and above 70% by FY2028.
Q3 FY2026 callFull-year earnings outlook raised after three quarters of beats
In February management guided earnings to the low end of its range and held free cash flow near the bottom; in August it raised the earnings range and the cash flow outlook.
Tone shiftQ1 FY2026 → Q3 FY2026Windows 11 upgrade still has installed base left to convert
The upgrade cycle has driven PC demand for two years, and management says the remaining conversions sit in small and medium businesses outside North America, giving HP a demand base beyond AI PCs.
Q3 FY2026 call
PC unit demand projected to fall by a high-teens rate
HP expects revenue to grow while units shrink, so results depend on holding prices up. If buyers resist the increases, revenue growth reverses and fixed costs are spread over fewer machines.
Q3 FY2026 callCommercial demand pulled forward into the first half
Customers bought ahead of expected price increases, which inflated reported growth. Management put the benefit at 2% to 3% of revenue, so the second half starts from a lower base.
Q2 FY2026 callInvestor Day shelved while the CEO search continues
Management scheduled an April Investor Day to lay out its AI plan; it has since postponed the event with no new date while an interim chief executive runs the company.
Tone shiftQ4 FY2025 → Q1 FY2026
Profitability & Financial Strength
In short: Cash generation is strong and guidance rose, but gross margin is shrinking as cheaper inventory runs out.
Free cash flow guidance raised on a negative cash conversion cycle
HP collects from customers before it pays suppliers, so Personal Systems growth releases cash. Trailing free cash flow rose to $3.9 billion and management now guides to $3.0 billion to $3.2 billion for the year.
Q3 FY2026 callAI cost program targets $1 billion of gross savings
Savings from redesigning processes and consolidating platforms are meant to offset part of the component inflation and fund investment, with about $300 million expected by the end of this fiscal year.
Q1 FY2026 callShareholder returns funded from free cash flow
HP returned $2.3 billion over the last twelve months through dividends and buybacks and raised the quarterly dividend for a tenth consecutive year, though buybacks pause if gross leverage rises above two times.
Filed financials
Gross margin fell as commodity costs rose
Gross margin dropped 1.7 points to 18.8% as Personal Systems, which earns a lower margin than printing, became a larger share of revenue while component costs climbed.
Filed financialsPersonal Systems margin now below the long-term range
A year ago the segment was guided to the low end of the 5% to 7% range; the third quarter came in at 4.6% and management expects the fourth quarter to be the low point.
Tone shiftQ4 FY2025 → Q3 FY2026Tariff refunds flatter this quarter and the full year
The raised full-year range of $3.19 to $3.29 includes $0.19 per share from estimated tariff refunds, leaving underlying earnings close to the range management gave before.
Q3 FY2026 call
Market Position
In short: HP leads in printing and gains share in PCs, while memory suppliers and tariffs set its costs.
Tank printers gain share and earn profit upfront
Tank printers make their margin on the hardware rather than on ink, so share gains there support print profit as traditional cartridge hardware declines. Unit growth was 42% with share gains both year over year and sequentially.
Q3 FY2026 callAttach businesses supply a third of PC gross profit
Peripherals, collaboration devices, services and the workforce experience platform carry no memory cost, so they cushion segment margins when component prices rise and give HP room to grow profit without volume.
Q3 FY2026 call
Memory supply is concentrated among a few suppliers
HP buys components from third parties and has limited leverage over price in a shortage. Management has secured supply for this fiscal year but is still negotiating cost and allocation for the next.
10-K, filed 2025-12-10Tariffs remain a live cost and policy risk
US tariffs on imported goods raised HP's costs through fiscal 2026 and the rules keep changing. HP received refunds in the third quarter but says the refund process for multinationals is still evolving.
10-K, filed 2025-12-10PC demand is cyclical and fell sharply in the last downturn
Revenue fell 62% between FY2011 and FY2016 as the PC market contracted while operating margin barely moved, showing how much volume HP can lose in a hardware downturn without much profit protection.
Filed financials