Memory cost impact estimated at $0.30 per share net of mitigations
HP reported a solid Q4, but the main focus of the call was managing an unprecedented and rapid rise in memory costs expected to hit in the back half of FY26. Management issued a cautious full-year EPS guide of $2.90-$3.20, including a $0.30 net EPS headwind from memory, and outlined mitigation strategies including pricing increases, cost cuts, and de-spec'ing. HP guided FY26 EPS at $2.90-$3.20, below expectations, primarily due to a significant memory cost headwind in H2.
Buzzberg 분석Memory cost impact estimated at $0.30 per share net of mitigationsHP reported a solid Q4, but the main focus of the call was managing an unprecedented and rapid rise in memory costs expected to hit in the back half of FY26. Management issued a cautious full-year EPS guide of $2.90-$3.20, including a $0.30 net EPS headwind from memory, and outlined mitigation strategies including pricing increases, cost cuts, and de-spec'ing. HP guided FY26 EPS at $2.90-$3.20, below expectations, primarily due to a significant memory cost headwind in H2.전체 분석 보기분석 접기
HP reported a solid Q4, but the main focus of the call was managing an unprecedented and rapid rise in memory costs expected to hit in the back half of FY26. Management issued a cautious full-year EPS guide of $2.90-$3.20, including a $0.30 net EPS headwind from memory, and outlined mitigation strategies including pricing increases, cost cuts, and de-spec'ing. HP guided FY26 EPS at $2.90-$3.20, below expectations, primarily due to a significant memory cost headwind in H2.
The company said it has enough memory inventory on hand to avoid cost impact in H1, pushing higher costs to Q3 and Q4.
Mitigation strategies include price increases across the portfolio, qualifying lower-cost suppliers, and redesigning products to lower memory configurations.
A large AI-driven cost transformation program was announced, targeting $1B in gross savings over three years, alongside 4,000-6,000 layoffs.
PERSONAL_SYSTEMS rev growth8%
reported
Revenue$14.639B
reported
EPS$0.93
reported
Gross margin19.84%
reported
이번 분기에 달라진 점
01
Guidance
Memory cost impact estimated at $0.30 per share net of mitigations
Guidance tone
02
AI
AI PCs to reach 40-50% of shipments in fiscal 2026
Management emphasized AI as a core driver, with AIPCs doubling revenue year-over-year, penetration above 30% of shipments, and expectations to reach 40-50% in fiscal 2026. They are also embedding AI internally to drive $1 billion in gross savings over three years, with initial…
03
AI
New AI cost program to save $1 billion over three years
Management emphasized AI as a core driver, with AIPCs doubling revenue year-over-year, penetration above 30% of shipments, and expectations to reach 40-50% in fiscal 2026. They are also embedding AI internally to drive $1 billion in gross savings over three years, with initial…
04
Costs
HP workforce reductions of 4,000 to 6,000 over next year
Mitigation strategies include price increases across the portfolio, qualifying lower-cost suppliers, and redesigning products to lower memory configurations.
AI, 자본지출 및 수요 분석
AI
플랫폼 및 수익화
Management emphasized AI as a core driver, with AIPCs doubling revenue year-over-year, penetration above 30% of shipments, and expectations to reach 40-50% in fiscal 2026. They are also embedding AI internally to drive $1 billion in gross savings over three years, with initial savings of $300 million by end of fiscal 2026.
수요
수주 및 전환
Windows 11 refresh only 60% complete, tailwind to last. Management acknowledged significant memory cost headwinds and took a prudent guidance approach, but expressed confidence in mitigation actions and long-term AI-driven transformation.
자본지출
투자 및 생산능력
Capex is expected to be down slightly year-over-year in fiscal 2026, offsetting lower earnings in free cash flow guidance. The reduction is part of broader cost management, while restructuring charges are estimated around $250 million for the year.
톤 · Cautiously Optimisti
Management acknowledged significant memory cost headwinds and took a prudent guidance approach, but expressed confidence in mitigation actions and long-term AI-driven transformation.
공급망 알파
A1
Memory cost increases are expected to be a significant headwind, with a net EPS impact of $0.30, but management implies the gross impact is much larger, indicating aggressive mitigation through pricing and mix shifts.
“We have shared that the cost of memory is between 15 and 18 percent of PCs. But from there, you can calculate the gross impact that you will see is significantly bigger than the 30 cents that we are quantifying.”
HP's mitigation strategy includes de-spec'ing memory configurations and using its Workforce Experience Platform telemetry to steer commercial customers to lower-memory configurations, potentially dampening long-term ASP growth for memory makers in the PC segment.
“We also can use the breadth of our portfolio to make sure that customers get the right configuration and to de-scale in those cases where it's possible to balance company profitability with experience from customers.”
HP estimates that 60% of the Windows 11 install base has been converted, with the remaining 40% concentrated in SMB and Asia/Europe, implying a longer tailwind for PC refresh demand than previously thought.
“We estimate that about 60% of the install base have moved to Windows 11. We have seen the conversion happening faster in the enterprise space and also in North America. The biggest opportunity now is going to be in SMB and in Europe and in…”
Partnership with Rakuten to bring AI models to edge devices could expand HP's AIPC appeal in Japan.
“...like Rakuten or in Japan to take their models and the systems that they have in the cloud and bring them to the edge, an announcement we made a few weeks ago.”
HP estimates that 60% of the Windows 11 install base has been converted, with the remaining 40% concentrated in SMB and Asia/Europe, implying a longer tailwind for PC refresh demand than previously thought. — The PC refresh cycle is only about halfway through, with the bulk of the opportunity still ahead, which is positive for the broader PC supply chain.
“With the announcements that Microsoft made last week on the consumer side, The ability to manage PCs with voice I think are going to be exciting, very exciting for our consumers.”
Hi, good afternoon. This is Mike Cadiz on behalf of Asya Merchant at Citi. So, my question is on AIPC penetration. So, despite you hitting the 25 to 30 percent penetration ahead of schedule, how do you think that tariffs and now the elevated commodity costs have affected the expected trajectory toward the 50% in the coming years that you've telegraphed?
So we continue to be very optimistic about the penetration of AIPCs. And as I mentioned before, we will be prioritizing premium categories as we will be working on the memory situation next year. The penetration of AIPCs, as I said before, is above 30%. today at the end of the quarter and easily driven by the additional value these pieces bring compared to the install base and the fact that our customers want to be ready as soon as applications start taking advantage of the capabilities of these products. Last quarter I mentioned the work that we are doing with software companies to leverage those and this work has continued and we have continued to make progress. With the announcements that Microsoft made last week on the consumer side, The ability to manage PCs with voice I think are going to be exciting, very exciting for our consumers. They have improved the tools that they have for other companies to take advantage of GPUs and MPUs in the devices. We have made progress with other software companies like Adobe in leveraging those assets with more local vendors like Rakuten or in Japan to take their models and the systems that they have in the cloud and bring them to the edge, an announcement we made a few weeks ago. And we have also worked with smaller companies that drive very specific value, for example, in helping sales teams to be more efficient or in helping product managers to present better. All these are really helping to drive adoption. And something we think very relevant is that we have deployed these solutions internally in HP with Not only the PCs, but with a curated set of applications, we have seen up to 17% of productivity improvement. And this is a very important value proposition for us, but also for our customers.
HP's mitigation strategy includes de-spec'ing memory configurations and using its Workforce Experience Platform telemetry to steer commercial customers to lower-memory configurations, potentially dampening long-term ASP growth for memory makers in the PC segment. — This proactive de-spec'ing could cap the amount of memory content per PC, a slight counter-trend to the AI PC push for higher specs.
Great. Thank you. And if I could just follow up around the headwind from memory of $0.30 on EPS net of mitigations, what do you think the gross impact is, and what's your confidence level on the mitigations? You know, could it be better or worse? And then just as a quick follow-up, are you also seeing similar kind of tightness on PCB and kind of inflation related to that? Thank you.
Sure. So let me start on the quantification. We have shared enough numbers that you can calculate. We have shared that the cost of memory is between 15 and 18 percent of PCs. But from there, you can calculate the gross impact that you will see is significantly bigger than the 30 cents that we are quantifying. And we have fairly high confidence in the actions that we have put in place. In fact, we mentioned that we have been conservative in the guide for the full year and that based on the actions I described before, if we can do better, we will be better. But given that we are guiding the full year and we expect to see the majority of the impact in the second half, we thought it was important to be prudent at this point. In terms of other components, This is the area where we see the biggest impact, memories and storage. The rest of the space, we are confident and we don't see any shortages at this point. And as I said before, even in the memory and storage space, we are in a good position from a supply perspective, given the relationships and the contracts we have with our suppliers.
Memory cost increases are expected to be a significant headwind, with a net EPS impact of $0.30, but management implies the gross impact is much larger, indicating aggressive mitigation through pricing and mix shifts.
Great. Thank you. And if I could just follow up around the headwind from memory of $0.30 on EPS net of mitigations, what do you think the gross impact is, and what's your confidence level on the mitigations? You know, could it be better or worse? And then just as a quick follow-up, are you also seeing similar kind of tightness on PCB and kind of inflation related to that? Thank you.
Sure. So let me start on the quantification. We have shared enough numbers that you can calculate. We have shared that the cost of memory is between 15 and 18 percent of PCs. But from there, you can calculate the gross impact that you will see is significantly bigger than the 30 cents that we are quantifying. And we have fairly high confidence in the actions that we have put in place. In fact, we mentioned that we have been conservative in the guide for the full year and that based on the actions I described before, if we can do better, we will be better. But given that we are guiding the full year and we expect to see the majority of the impact in the second half, we thought it was important to be prudent at this point. In terms of other components, This is the area where we see the biggest impact, memories and storage. The rest of the space, we are confident and we don't see any shortages at this point. And as I said before, even in the memory and storage space, we are in a good position from a supply perspective, given the relationships and the contracts we have with our suppliers.
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