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HPQ is trading roughly flat despite delivering impressive upside Q1 (Jan) results. The company posted a larger-than-normal EPS beat and its strongest quarterly revenue growth in four years. However, shares are under pressure after management reaffirmed FY26 EPS and FCF guidance but indicated results are likely to come in at the low end of the range due to higher memory costs.

• Q1 results were better than expected across the board, highlighted by a sizable EPS beat and solid top-line growth, marking HPQ's strongest reported quarterly growth in four years, albeit helped somewhat by F/X tailwinds.
• Personal Systems was the clear growth driver, delivering better-than-expected results and benefiting from PC market share gains in both commercial and consumer categories.
  • The Windows 11 refresh cycle and growing demand for AI PCs continue to support momentum, with AI PCs representing an increasing percentage of total shipments each quarter.
  • The main overhang is rising input costs, particularly DRAM and NAND, as AI infrastructure buildouts drive memory prices higher across the industry.
  • Management expects memory cost volatility to persist through FY26 and likely into FY27, creating ongoing pressure on Personal Systems margins.
  • HPQ has taken mitigation steps, including securing long-term memory supply agreements, qualifying new suppliers, building strategic inventory, and accelerating product configuration adjustments.
  • While near-term margin pressure remains a concern, HPQ emphasized that a meaningful portion of Personal Systems profit comes from higher-margin services and peripherals, providing some diversification.
• Printing revenue declined modestly but performed in line with expectations, while continuing to generate healthy margins and benefiting from steady demand in consumer subscriptions and industrial print.
• HPQ also recently announced that Enrique Lores stepped down as CEO to lead PayPal (PYPL). Bruce Broussard has been named interim CEO, and the search for a permanent CEO is ongoing. By not announcing a new CEO, this may have also contributed modestly to investor uncertainty.

Briefing.com Analyst Insight:

We think the weakness in HPQ shares is being driven primarily by margin concerns tied to rising memory prices. While Q1 results were undeniably strong, investors appear focused on the company's commentary that cost pressures will linger through FY26 and likely into FY27. That extended timeline, combined with guidance being skewed to the low end of the range, is likely spooking investors. Even so, HPQ's diversified profit base within Personal Systems, including services and peripherals, along with proactive supply chain mitigation efforts, should help cushion the impact over time.