Quick Summary
- HP delivered Q2 revenue totaling $14.4 billion, reflecting a 9% increase from the previous year and surpassing Wall Street’s $14.07 billion projection.
- The company’s adjusted earnings per share reached $0.86, significantly exceeding the anticipated range of $0.71–$0.72, fueled by robust demand for AI-integrated PCs.
- Artificial intelligence-enabled computers currently represent 44% of HP’s overall PC sales mix, climbing from 35% in the preceding quarter, with management targeting 60–70% penetration within the coming fiscal year.
- Management reduced the upper limit of annual adjusted EPS projections by $0.10 to a range of $2.90–$3.10, attributing the change to escalating memory component expenses anticipated to reach their zenith in Q4.
- JPMorgan analysts elevated their price objective to $26, though the broader Wall Street consensus maintains a “Reduce” recommendation with an average target of $22.17.
HP unveiled fiscal second-quarter results showing revenue of $14.4 billion, marking a 9% year-over-year expansion that exceeded the analyst consensus of $14.07 billion. The company’s adjusted earnings per share of $0.86 comfortably surpassed Wall Street’s $0.72 projection. Shares responded with a surge of up to 15% during extended trading sessions.
The Personal Systems division emerged as the performance leader, generating $10.2 billion in sales—a 13% year-over-year improvement. Revenue from commercial PC products increased 14%, while consumer-focused PC sales advanced 10%. Notably, overall PC shipment volumes declined 7%, indicating that revenue growth stemmed from elevated average selling prices rather than increased unit sales.
The Printing division maintained stable performance at $4.2 billion in quarterly revenue. However, the segment’s operating margin compressed to 18.3% compared to 19.2% during the same period last year.
Demand for AI-capable personal computers provided substantial momentum this quarter. The proportion of AI-enhanced devices within HP’s product portfolio expanded to 44%, advancing from just over 35% in the previous quarter. Management forecasts this percentage will climb to 60–70% during the upcoming fiscal year and eventually exceed 70% by fiscal 2028.
Under generally accepted accounting principles, diluted earnings per share came in at $0.49, falling below the company’s previously stated guidance bracket of $0.52 to $0.58. This variance was primarily attributable to $365 million in restructuring expenses and related charges.
Memory Component Pricing Pressure Intensifies
The organization is contending with constrained memory chip availability as data center requirements drive component pricing upward. Chief Financial Officer Karen Parkhill described multiple countermeasures HP is implementing: redesigning product configurations, securing more economical component alternatives, emphasizing higher-margin product lines, and implementing price adjustments corresponding to commodity cost inflation.
Management anticipates memory chip constraints will pressure operating margins to their lowest point during Q4, with recovery expected as fiscal 2027 commences.
Interim Chief Executive Bruce Broussard commented: “During the second quarter, we continued executing our future of work strategy through intelligent devices, edge AI and connected experiences while navigating rising commodity costs.”
Annual Earnings Outlook Adjusted Downward
HP revised its full-year adjusted earnings per share forecast to $2.90–$3.10, representing a $0.10 reduction at the upper boundary. Under GAAP accounting standards, the annual earnings projection was lowered to $2.15–$2.45 per share from the prior range of $2.47–$2.77. The company additionally forecasts annual free cash flow between $2.8 billion and $3.0 billion.
For the third quarter, management provided adjusted EPS guidance of $0.61–$0.71.
Multiple Wall Street firms revised their valuations following the earnings release. JPMorgan increased its price target from $22 to $26 while keeping a neutral stance. TD Cowen similarly adjusted to $26 with a hold rating. Barclays established a $19 target with an underweight position, and Wells Fargo moved to $20 with an underweight recommendation.
Despite the better-than-expected quarterly performance, Wall Street’s aggregate rating remains at “Reduce” with a consensus price objective of $22.17, based on MarketBeat tracking. The stock currently holds two strong buy ratings, ten hold recommendations, and five sell ratings from analysts.
HPQ shares closed at $24.92 before the earnings announcement, trading within a 12-month range spanning $17.56 to $29.55.
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