HP Inc. Q3 Fiscal 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended July 31, 2026, and the nine months ended July 31, 2026. HP Inc. operates through three reportable segments: Personal Systems (desktops, notebooks, workstations, AI PCs), Printing (hardware, supplies, services), and Corporate Investments. The company is executing a strategic transformation focused on AI adoption and productivity, including the "Fiscal 2026 Plan" to reduce headcount and drive cost savings.
Key Financial Metrics
| Metric | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Total Net Revenue | $15,677 million | $13,932 million | $44,523 million | $40,656 million |
| Gross Profit | $2,945 million | $2,851 million | $8,796 million | $8,430 million |
| Gross Margin | 18.8% | 20.5% | 19.8% | 20.7% |
| Operating Earnings | $892 million | $716 million | $2,263 million | $2,215 million |
| Net Earnings | $661 million | $763 million | $1,656 million | $1,734 million |
| Diluted EPS | $0.71 | $0.80 | $1.79 | $1.82 |
| Operating Cash Flow (YTD) | $3,044 million (vs. $2,073 million YTD 2025) | |||
| Total Debt | $9.16 billion (as of July 31, 2026) | |||
| Cash & Equivalents | $4.17 billion (as of July 31, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Total net revenue increased 12.5% in Q3 and 9.5% YTD compared to the prior year. Growth was driven by Personal Systems (up 18.5% in Q3) due to pricing actions and favorable currency, partially offset by demand softness in Printing (down 2.2% in Q3).
- Margin Pressure: Gross margin decreased 1.7 percentage points in Q3 and 0.9 percentage points YTD. This was primarily due to higher commodity costs (memory and storage) and unfavorable mix shifts toward Personal Systems, partially offset by pricing actions and IEEPA tariff refunds.
- Restructuring Charges: Restructuring and other charges increased significantly YTD to $539 million (vs. $302 million prior year), driven by the Fiscal 2026 Plan, including a $280 million Special Termination Benefit related to a voluntary Early Retirement program.
- Segment Performance:
- Personal Systems: Revenue grew 18.5% in Q3, driven by a 40.8% increase in Average Selling Prices (ASPs) despite a 15.8% decline in unit volume.
- Printing: Revenue declined 2.2% in Q3 due to lower installed base usage and competitive pressures, though operating earnings increased 4.1% due to margin improvements.
Guidance, Outlook, and Risks
- Transformation Strategy: HP is implementing the Fiscal 2026 Plan to reduce global headcount by approximately 4,000 to 6,000 employees, with estimated pre-tax charges of $650 million. The plan focuses on AI adoption and productivity.
- Capital Allocation: The company returned $1.5 billion to shareholders YTD via dividends ($0.8 billion) and share repurchases ($0.7 billion). Approximately $7.7 billion remains under the share repurchase authorization.
- Macroeconomic Risks: HP faces ongoing challenges from inflationary pressure on memory and storage costs, supply constraints, and geopolitical instability. The company received $127 million in IEEPA tariff refunds YTD and is seeking recovery of an additional $0.3 billion.
- Litigation: Significant ongoing matters include the India Directorate of Revenue Intelligence (DRI) customs dispute (decision issued June 2026, appeal pending) and the Autonomy-related legal proceedings (damages award of $1.24 billion issued March 2026, appeal pending).
Investor Verification Checklist
- Commodity Cost Impact: Verify the sustainability of ASP increases in Personal Systems against rising memory and storage costs and potential demand elasticity.
- Restructuring Execution: Monitor the timeline and cost realization of the Fiscal 2026 Plan, specifically the $650 million estimated charge and headcount reduction targets.
- Printing Demand: Assess the trajectory of the Printing segment's installed base and usage rates, which are currently declining.
- Litigation Outcomes: Track the resolution of the India DRI appeal and the Autonomy damages appeal, as these could materially impact future earnings or cash flows.
- Working Capital: Review the increase in Days Sales Outstanding (DSO) to 41 days and Days Inventory Outstanding (DIO) to 73 days, indicating potential changes in collection or inventory management efficiency.