HP beats on AI PC momentum despite cautious full-year outlook
Personal Systems revenue jumps 11% as printing segment declines, memory costs pressure margins
HP Inc. delivered stronger-than-expected first quarter earnings driven by surging demand for artificial intelligence-capable computers, though shares fell as management warned rising memory costs and trade tensions would likely push full-year results to the lower end of its guidance range.
The personal computer and printing giant reported non-GAAP diluted earnings per share of $0.81 for the fiscal first quarter ended January 31, up 9.5% from a year earlier and beating analyst estimates of $0.77. Revenue climbed 6.9% to $14.4 billion, exceeding Wall Street expectations.
HP shares declined approximately 1% in afternoon trading following the announcement, reflecting investor concern over the company's tempered outlook despite the quarterly beat. The stock, which closed at $18.20, has fallen more than 44% from its 52-week high of $32.62 amid broader uncertainty about the PC market cycle.
The company's Personal Systems business—which includes laptops and desktops—delivered the standout performance, with revenue jumping 11% year-over-year to $10.3 billion. Consumer personal computer revenue surged 16%, while commercial systems revenue rose 9%. Total units shipped increased 12%, with consumer units up 14% and commercial units gaining 11%.
HP executives attributed the strength to growing enterprise and consumer adoption of AI-powered computers, a newer category of devices equipped with specialized processors to handle generative AI tasks directly on the hardware rather than through cloud services. The category has become a focal point for PC makers seeking to revive a market that struggled through post-pandemic inventory corrections in 2024 and early 2025.
"We are seeing increasing momentum for AI PCs across both consumer and commercial segments," Enrique Lores, HP's chief executive, said in a statement accompanying the results. "Our investments in innovation and customer experience are driving share gains and positioning us well for the next wave of PC refresh cycles."
However, the company's traditional printing business continued to face headwinds. Printing revenue declined 2% to $4.2 billion, with consumer printing revenue falling 8% and commercial printing revenue dropping 3%. Supplies revenue decreased 1%, while total hardware units shipped declined 6%. Despite the revenue decline, the printing division maintained robust operating margins of 18.3%.
Looking ahead, HP maintained its previously issued fiscal 2026 guidance but signaled that results would likely land near the lower end of those ranges. The company projects GAAP diluted earnings per share of $2.47 to $2.77 and non-GAAP diluted earnings per share of $2.90 to $3.20 for the full year. Free cash flow is expected to range between $2.8 billion and $3.0 billion.
Management cited two primary factors pressuring the outlook: rising costs for memory components and persistent U.S. trade headwinds. Memory prices have rebounded after a prolonged downturn, squeezing margins for PC manufacturers. Meanwhile, ongoing trade tensions between the U.S. and China are creating supply chain complexity and potential tariff exposure.
"Given the fluid operating environment and increasing memory costs, we currently expect our fiscal 2026 results to be closer to the low end of our guidance range," the company stated in its earnings release.
For the fiscal second quarter, HP projected GAAP earnings per share of $0.52 to $0.58 and non-GAAP earnings per share of $0.70 to $0.76.
Analysts remain divided on the stock's prospects. Of 17 analysts covering HP, 1 rates it a strong buy, 2 recommend buy, 10 suggest hold, 3 advise sell, and 1 has a strong sell rating. The consensus price target stands at $23.21, representing roughly 27% upside from current levels.
HP's valuation reflects investor caution about the PC industry's ability to sustain the current recovery. The stock trades at 6.9 times trailing earnings, well below the technology sector average, with a price-to-sales ratio of just 0.31 times. The company's market capitalization stands at approximately $17.2 billion.
The quarterly performance underscores the diverging trajectories within HP's portfolio. While AI PCs are providing a meaningful tailwind for Personal Systems, the printing business faces secular challenges as businesses and consumers reduce printing volumes in an increasingly digital world.
HP returned $600 million to shareholders during the quarter through a combination of share repurchases and dividends. The company's dividend yield currently sits at 6.2%, making it attractive to income-focused investors despite the stock's price weakness.
Investors will be watching closely for signs that the AI PC momentum can continue offsetting pressure in the printing segment and whether memory cost inflation moderates as the year progresses. The company's ability to maintain or improve margins while navigating trade and supply chain challenges will be critical to regaining market confidence.