HP Inc. (HPQ) Stock Falls Despite Strong Q2 Earnings Beat — What Investors Need to Know

Key Takeaways

• HP delivered Q2 adjusted earnings per share of $0.86, exceeding Wall Street’s $0.71 consensus by 21%
• Total revenue reached $14.4 billion, representing a 9% year-over-year increase and surpassing the $14 billion projection
• The Personal Systems division generated $10.2 billion in revenue, marking a 13% year-over-year gain
• HPQ shares rose initially following the earnings release but reversed course to trade lower in premarket activity
• The company refined its full-year EPS outlook to $2.90–$3.10, narrowing the previous $2.90–$3.20 range

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HP surpassed expectations on both revenue and earnings in its fiscal second quarter, yet investor enthusiasm proved short-lived. HPQ shares traded down 1.5% in premarket action Thursday morning, despite the impressive financial performance.

HP Inc., HPQ

The technology giant posted adjusted earnings of $0.86 per share for the three months ending April 30, significantly outpacing the $0.71 consensus estimate from Wall Street analysts. Total revenue of $14.4 billion likewise exceeded the $14 billion analyst forecast.

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This represents a 9% revenue increase compared to the corresponding quarter last year — a respectable performance for a firm maneuvering through challenging cost dynamics.

Personal Systems Division Delivers Strong Performance

The Personal Systems segment emerged as the clear winner, generating $10.2 billion in revenue — a 13% year-over-year increase that beat analyst projections of $10 billion. Commercial PS revenue climbed 14%, while Consumer PS advanced 10%.

However, unit shipments painted a contrasting picture. Overall PC unit sales declined 7%, with both Consumer and Commercial categories experiencing roughly 7–8% drops. The combination of higher revenue despite lower unit volumes suggests effective pricing strategies are compensating for volume declines.

The Printing division reported $4.2 billion in revenue, essentially unchanged from the prior year and marginally above the $4.1 billion estimate. Consumer Printing revenue decreased 10%, while Commercial Printing remained flat. Supplies revenue inched up 1%.

Elevated Memory Costs Continue to Challenge Margins

Escalating memory expenses have remained a significant challenge for HP and the wider technology hardware sector. Memory demand associated with AI infrastructure expansion has significantly exceeded available supply, driving costs upward and compressing margins throughout the industry.

HP has been implementing price increases to counterbalance these pressures. The approach appears to be delivering results, at least from a revenue perspective.

Operating margins illustrated the ongoing challenge, with Personal Systems achieving 5.2% and Printing reaching 18.3%.

Free cash flow for the quarter totaled $0.8 billion, while operating cash flow came in at $0.9 billion. HP distributed $374 million to shareholders via dividends and share repurchases, including $274 million in dividends at $0.30 per share.

The company concluded the quarter holding $3.7 billion in gross cash.

Interim CEO Bruce Broussard highlighted advancements in AI PCs, Z workstations, and AI-enabled printing solutions as indicators that the company is positioning itself for sustained long-term expansion.

CFO Karen Parkhill stated the company is “executing with discipline in a dynamic environment” and leveraged the solid two-quarter performance to refine its annual forecast.

For the third quarter, HP projected non-GAAP EPS of $0.61–$0.71. For the complete fiscal year 2026, the company revised its non-GAAP EPS estimate to $2.90–$3.10, tightening from the earlier $2.90–$3.20 range. Management also reaffirmed free cash flow guidance of $2.8–$3.0 billion for the year.

In February, HP had indicated it anticipated results landing “closer to the low end” of its guidance range. The revised outlook signals increased management confidence.

GAAP EPS for the second quarter registered at $0.49, up from $0.42 in the year-ago period but falling short of the company’s guided range of $0.52–$0.58.