HP reported Q1 FY26 revenue of $14.4B (+7% YoY) and EPS of $0.81, at the top of their guidance. Personal systems revenue grew 11% on momentum from Windows 11 refresh and AI PCs, while print declined 2%. However, management flagged a surge in memory costs, now expected to be ~35% of PC BOM for the year, leading to PS margins below long-term range and a lowered outlook—expecting to be at the lower end of EPS guidance. Memory cost surge: DRAM/NAND prices doubled sequentially, pushing memory to ~35% of PC BOM for FY26.
HP reported Q1 FY26 revenue of $14.4B (+7% YoY) and EPS of $0.81, at the top of their guidance. Personal systems revenue grew 11% on momentum from Windows 11 refresh and AI PCs, while print declined 2%. However, management flagged a surge in memory costs, now expected to be ~35% of PC BOM for the year, leading to PS margins below long-term range and a lowered outlook—expecting to be at the lower end of EPS guidance. Memory cost surge: DRAM/NAND prices doubled sequentially, pushing memory to ~35% of PC BOM for FY26.
Management is focused on AI at the edge, with AI PCs now over 35% of shipments and increasing every quarter. They are expanding partnerships with Microsoft and OpenAI to embed AI into products and operations, and are scaling AI agents across supply chain for productivity gains…
Memory cost surge: DRAM/NAND prices doubled sequentially, pushing memory to ~35% of PC BOM for FY26.
Management acknowledges significant near-term headwinds from memory costs and trade uncertainty, maintaining guidance but expecting to be at the lower end.
Guidance tone
Management is focused on AI at the edge, with AI PCs now over 35% of shipments and increasing every quarter. They are expanding partnerships with Microsoft and OpenAI to embed AI into products and operations, and are scaling AI agents across supply chain for productivity gains, targeting $1 billion in savings by FY28.
PC unit TAM expected to decline double digits in calendar 26. Management acknowledges significant near-term headwinds from memory costs and trade uncertainty, maintaining guidance but expecting to be at the lower end.
Management acknowledges significant near-term headwinds from memory costs and trade uncertainty, maintaining guidance but expecting to be at the lower end.
“So that we are not able to, we are not fully, if I say this, that if there is a specific cost escalation of the memory, you pass on that cost increase, but overall system will be limited because of some of these actions which I called out.”
“memory and storage costs made up roughly 15 to 18 percent of our PC bill of materials, and we now currently estimate this to be roughly 35 percent for the year”
“we are aligned with industry experts now projecting the PC unit TAM to decline double digits in calendar year 26”
“we are also accelerating our engineering efforts to qualify these commodities across our different platforms”
“consumer, as Karen said, there was a bit of pull-in in the month of December is what we observed”
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| EPS | FY2026 | $2.90–$3.20 | $3.05 | GUIDED |
| EPS | FY2026 Q2 | $0.70–$0.76 | $0.73 | GUIDED |
| Free cash flow | FY2026 | $2.8B–$3B | $2.9B | GUIDED |
| Issued | Metric | Target | Guide | Actual | Outcome |
|---|---|---|---|---|---|
| FY2026 Q2 | EPS | FY2026 Q3 | $0.61–$0.71 | $0.83 | Met / beat |
| FY2025 Q4 | EPS | FY2026 Q1 | $0.73–$0.81 | $0.81 | Met / beat |
HP is piloting OpenAI's enterprise agent platform, indicating OpenAI's push into enterprise AI deployment and potential broader enterprise adoption.
“this month HP established an exploratory partnership with OpenAI to pilot OpenAI Frontier, their new enterprise platform”
… to further simplify device and printer management, combined with reducing downtime. WXP is now the most comprehensive multi-vendor fleet management solution across PCs, print, and collaboration. By taking in data from 50 million endpoints and processing more than a terabyte of data daily, The platform enables predictive insights that allow IT teams to proactively identify issues, streamline operations, and improve workforce activity. In addition, this month HP established an exploratory partnership with OpenAI to pilot OpenAI Frontier, their new enterprise platform for building and managing AI agents. This puts HP at the forefront of enterprise AI deployments with built-in governance, security, and observability as we move from pilots to scaled adoption across workforce. In March, we will host our HP Imagine event for industry and media analysts. This showcases our latest innovative solutions to help people do their best work from anywhere. The new experiences we unveil at HP Imagine will demonstrate how we continue to lead the future of work by helping customers drive growth, professional fulfillment, and foster innovation in the era of AI. Now, let me touch on the rising …
HP is embedding Microsoft 365 Copilot into printers, deepening the partnership and potentially driving Copilot adoption in print workflows.
“We also expanded our partnership with Microsoft embedding Microsoft 365 Copilot directly into HP printers”
… Chris Serka recognizing our leadership in AI-driven print solutions. The next step in our strategy is driving better together experiences. We believe there is enormous value in integrating devices, software, and services to work as a unified experience. In the first quarter, we launched HP Digital Passport, a personalized hub that centralizes information across the full HP ecosystem, resulting in better customer engagement and more efficient support. We also expanded our partnership with Microsoft embedding Microsoft 365 Copilot directly into HP printers to improve how employees manage documents on the device. This brings us to our third step, empowering CIOs with tools to gain actionable insights, manage risk, and run IT more strategically at scale. To that end, we introduce multiple enterprise-focused updates in Q1. expanding our workforce experience platform, commonly called WXP, capabilities to further simplify device and printer management, combined with reducing downtime. WXP is now the most comprehensive multi-vendor fleet management solution across PCs, print, and collaboration. By taking in data from 50 million endpoints and processing more than a terabyte of data …
HP is qualifying new memory suppliers and cutting qualification time in half, adding supply flexibility and potentially easing memory procurement constraints. — Increased qualified supplier base could weaken incumbents' pricing power over time.
Yeah, hi. Thanks for taking my question. For Bruce or Karen or even for Ketan, I understand you're operating well in a tough and fluid commodity environment. I wanted to find out if you can quantify what is the memory cost impact in Jan quarter What is baked in terms of the memory cost increase in April and fiscal year? And along the same path, with your memory suppliers, are you able to secure LTAs for volume only? Or is it volume and pricing? And then add a quick follow-up.
Yeah, thanks, Krish, for that question. I'll start, and then I'll ask Katen to add on. You know, in terms of the memory cost in the quarter, we, you know, it was included in our overall results. Given the fluidity of memory at this point, we're not going to try to quantify that net of mitigation action. I would say that we have included a significant increase in memory cost in our guidance. We have seen memory cost increase roughly 100% sequentially, and we do forecast that to further increase as we move into the fiscal year. To put this in a little bit more concrete terms, we did share last quarter that memory and storage costs made up roughly 15 to 18 percent of our PC bill of materials, and we now currently estimate this to be roughly 35 percent for the year. As we've said, we expect to see that largest impact in the second half. And because of that, we also said that we now expect our PSOP margins to be below our long-term range for the rest of the year. But that said, we are working hard to mitigate these headwinds, and we have a combination of product cost actions, company-wide cost actions, and price increases to help us recover that entire impact over time. Dayton, happy for you to add anything.
HP expects PC unit TAM to decline double digits in CY26 due to industry-wide pricing actions to offset memory costs, signaling potential demand destruction. — Competitors will face similar pressure, and the overall PC market could shrink materially.
… the dynamic memory environment highlighted earlier, as well as the associated mitigation actions we are taking. These include expanding pricing actions and implementing additional company-wide cost reductions. And as Bruce mentioned, we are evaluating last week's U.S. Supreme Court tariff ruling and the subsequent developments, but at this point do not expect to be negatively impacted. Looking at our outlook by segment, in personal systems, we are aligned with industry experts now projecting the PC unit TAM to decline double digits in calendar year 26, reflecting the impact of industry-wide pricing actions on demand. Against this backdrop, we continue to expect to drive revenue growth in our fiscal year through pricing actions, share gains in premium categories, an increased attach of higher margin offerings. We expect above-seasonal revenue performance to continue in our fiscal Q2, driven largely by the pricing actions we have taken, with revenue growth then moderating in the back half of the year. Considering the continued fluidity of the commodities market, we are modeling a range of outcomes that factor in memory prices that are roughly doubling versus the prior …
Memory cost as a share of PC BOM nearly doubled from 15-18% to ~35% for FY26, driven by DRAM/NAND price spikes.
Yeah, hi. Thanks for taking my question. For Bruce or Karen or even for Ketan, I understand you're operating well in a tough and fluid commodity environment. I wanted to find out if you can quantify what is the memory cost impact in Jan quarter What is baked in terms of the memory cost increase in April and fiscal year? And along the same path, with your memory suppliers, are you able to secure LTAs for volume only? Or is it volume and pricing? And then add a quick follow-up.
Yeah, thanks, Krish, for that question. I'll start, and then I'll ask Katen to add on. You know, in terms of the memory cost in the quarter, we, you know, it was included in our overall results. Given the fluidity of memory at this point, we're not going to try to quantify that net of mitigation action. I would say that we have included a significant increase in memory cost in our guidance. We have seen memory cost increase roughly 100% sequentially, and we do forecast that to further increase as we move into the fiscal year. To put this in a little bit more concrete terms, we did share last quarter that memory and storage costs made up roughly 15 to 18 percent of our PC bill of materials, and we now currently estimate this to be roughly 35 percent for the year. As we've said, we expect to see that largest impact in the second half. And because of that, we also said that we now expect our PSOP margins to be below our long-term range for the rest of the year. But that said, we are working hard to mitigate these headwinds, and we have a combination of product cost actions, company-wide cost actions, and price increases to help us recover that entire impact over time. Dayton, happy for you to add anything.
HP observed consumer demand pull-in in December ahead of price increases, suggesting customers are front-buying PCs to avoid expected price hikes.
Hi. Thanks for taking my question. Maybe for the first one, I know you mentioned sort of this is a dynamic environment, and you're seeing some level of pull-in in the ES segment. I'm just wondering, like, can you just dig into that a bit more? Is the pull-in largely on the consumer side that you're seeing right now, and how are you sort of delineating that versus whether you're seeing any pull-in on the enterprise side as well? Just wanted to understand sort of the thought process there and what it means for the second half in terms of revenue outlook for those two segments, and have a quick follow-up.
Yes. So, Sumik, I'll just add a couple of comments. Operational metrics, we have not observed any major disconnect from customer demand pattern versus market growth, especially on the commercial side. And consumer, as Karen said, there was a bit of pull-in in the month of December is what we observed. And we can consistently measure sell-out versus our selling data to look at that. The other proof point is that our channel inventory remains at a very healthy level, which means the customer demand powered by IPCs and Windows 11 has been strong, and the geography is called out.