HP Inc. HPQ is benefiting from growing demand for artificial intelligence (AI) PCs, premium computers and advanced computing solutions as customers upgrade their devices to handle increasingly demanding workloads. However, declining unit shipments and rising component costs remain challenges for the company.
In the third quarter of fiscal 2026, HP’s revenues increased 12.5% year over year to $15.7 billion, marking its ninth consecutive quarter of revenue growth. Personal Systems revenues rose 18.5% to a record $11.8 billion, supported by strength across commercial and consumer markets. Commercial revenues grew 22%, while consumer revenues increased 10%.
Notably, total Personal Systems unit shipments declined 16%, including a 14% drop in commercial units and a 19% decline in consumer units. The divergence between revenue growth and shipment volumes highlights HP’s strategy of prioritizing higher-value products, implementing pricing actions and expanding services.
Double-digit revenue growth in AI PCs, advanced computing solutions, hybrid systems and workforce solutions supported the segment’s performance. HP also gained share in premium PC categories, while AI PCs continued to expand as a proportion of its portfolio. Management expects AI PCs to account for 50% of shipments by the end of fiscal 2026.
HP is also expanding its AI computing capabilities beyond conventional PCs. Its OmniBook Ultra 16 and OmniDesk Mini Desktop are designed to support increasingly sophisticated AI workloads. The company is emphasizing edge AI, which can improve security, reduce latency and lower the costs associated with cloud-based computing. These developments could create additional upgrade opportunities as businesses adopt AI-enabled workflows.
How Competitors Fare Against HPQ
The AI PC business in which HPQ claims to lead the market is facing considerable competition from Dell Technologies DELL and Lenovo LNVGY.
Dell has numerous workstations that offer AI capabilities. These workstations are DELL XPS 13, Inspiron 14 Plus, Inspiron 14, Latitude 7455 and Latitude 5455. Lenovo’s lineup of AI computers includes Lenovo ThinkPad X1 Carbon 10th Gen and later, Lenovo Yoga 9i and Lenovo ThinkBook Plus Gen 3.
HPQ’s Price Performance, Valuation and Estimates
HPQ shares have appreciated 40.1% year to date, outperforming the Zacks Computer - Micro Computers industry and the Zacks Computer and Technology sector’s return of 31.2% and 17.1%, respectively.
HPQ YTD Performance Chart
Image Source: Zacks Investment Research
Despite the appreciation in the share price, HPQ trades at a discount. From a valuation standpoint, HPQ trades at a forward price-to-sales ratio of 0.47, below the industry’s 8.49. The discounted valuation is further substantiated by the Zacks Value Score of A.
HPQ Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HPQ’s fiscal 2026 revenues suggest year-over-year growth of 3.5%. Estimates have remained unchanged in the past 30 days.
Image Source: Zacks Investment Research
HPQ currently sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).