HP Inc. HPQ used its third-quarter fiscal 2026 earnings call to emphasize pricing discipline, premium PC mix and AI demand as it navigates rising memory and storage costs. Management also raised its fiscal 2026 earnings and free cash flow outlook.
The key forward message was that Personal Systems margins are expected to bottom in the fiscal fourth quarter, with mitigation actions and a richer product mix supporting improvement in fiscal 2027.
HPQ Raises FY26 Outlook
CFO Karen Parkhill said that HP increased its fiscal 2026 non-GAAP earnings per share (EPS) guidance to $3.19-$3.29 from $2.90-$3.10. The outlook includes a $0.19 favorable impact of estimated tariff refunds.
For the fiscal fourth quarter, HP expects non-GAAP EPS of $0.69-$0.79, including a $0.08 tariff-refund benefit. The company also raised its full-year free cash flow guidance to $3-$3.2 billion.
The fiscal third-quarter non-GAAP EPS of $0.83 beat the Zacks Consensus Estimate of $0.75. Meanwhile, revenues of $15.68 billion topped the consensus estimate of $14.85 billion and rose 12.5% year over year.
HP Inc. Price, Consensus and EPS Surprise
HP Inc. price-consensus-eps-surprise-chart | HP Inc. Quote
HP Uses Pricing to Offset PC Cost Pressure
CFO Parkhill said that Personal Systems revenues grew 18% year over year to $11.8 billion, even as total unit volume declined 16%. Higher pricing, favorable mix and services expansion outweighed the volume decline.
Personal Systems operating margin was 4.6%, below HP's long-term range as higher commodity costs and variable compensation pressured profitability. CFO Parkhill said that lower-cost inventory benefits are largely aiding HP as higher-cost inventory moves through earnings.
Management expects the Personal Systems margin to fall again in the fiscal fourth quarter before improving in fiscal 2027. Pricing, supplier qualification, product redesign, platform optimization and demand shaping form the mitigation plan.
HPQ Expands the AI PC & Edge Opportunity
Interim CEO Bruce Broussard said that AI PCs remain central to HP's strategy as more computing shifts toward the edge. AI PCs accounted for 46% of Personal Systems shipments in the fiscal third quarter.
Personal Systems president Ketan Patel said that HP expects AI PCs to reach 50% of the shipment mix by the year-end, then rise to 60-70% in fiscal 2027 and above 70% in fiscal 2028.
In Q&A, Patel said that customers are using local AI to reduce token costs, protect sensitive data, improve latency and support workloads in productivity, engineering, customer service and predictive maintenance.
HP Keeps Print Focused on Profitable Placement
Parkhill said that Printing revenues fell 2% year over year to $3.9 billion, with supplies down 3%. HP continued to avoid low-return hardware placements in a competitive market.
The Print operating margin was 18.1%, helped by tariff refunds and pricing actions. Excluding tariff refunds, Parkhill added that margin was at the low end of HP's long-term range.
HP also continued expanding in profit-upfront tank printers, wherein units rose 42%. Management plans to support Print through tank share gains, subscriptions, AI-enabled office products and industrial graphics.
HPQ Q&A Centers on Margin Recovery Path
An Evercore ISI analyst pressed management on the fiscal fourth-quarter Personal Systems outlook and margin recovery. Parkhill reaffirmed the fiscal fourth quarter as the expected low point and said that supply is sufficient to meet customer demand.
A Morgan Stanley analyst questioned how margins could improve while component inflation continues. Parkhill pointed to slower expected cost increases, delayed benefits from contract revisions and redesign work, and a growing mix of premium products and attached offerings.
A Bernstein analyst also asked about pricing catch-up. Patel said that pricing changes can reach customers immediately in some channels but take several months in others.
HP Sharpens Priorities During CEO Transition
Broussard said that HP is working to become more connected, AI-enabled and data-driven while expanding integrated solutions and recurring revenue opportunities. He also emphasized clearer capital and resource allocation.
Management's posture centered on protecting profitability while continuing to invest in AI devices, edge computing and higher-value categories. HP plans to provide its fiscal 2027 outlook on the next earnings call.
What Zacks Signals Say About HPQ
HP currently carries a Zacks Rank #3 (Hold), with Value and Growth Scores of A, a Momentum Score of C and a VGM Score of A. Under the Zacks framework, A grades are favorable, while the C Momentum Score is comparatively less supportive. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Style Scores complement the Zacks Rank, with the strongest combinations involving Zacks Rank #1 or #2 (Buy) stocks and A or B Style Scores. HPQ's Zacks Rank #3 is more neutral, and the Rank can change as analyst estimates are revised following the latest results.
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