HP Inc (NYSE:HPQ) shares were trading 2% lower on Thursday after the personal computing and printing giant reported second-quarter results that topped Wall Street estimates but trimmed its full-year profit outlook, with rising memory costs and slowing unit demand clouding the near-term picture.
The company posted non-GAAP earnings per share of $0.86 for the second quarter, well above its prior guidance range of $0.70 to $0.76. Total revenue rose 9% year-over-year to approximately $14.4 billion, marking the eighth consecutive quarter of top-line growth.
Personal Systems revenue surged 13% year-over-year, though unit shipments declined 7% over the same period. The revenue gain was driven largely by pricing, demand pull-ins, and a favorable product mix as AI PCs accounted for 44% of shipments in the quarter, up from 35% in the prior quarter.
Management said it expects AI PCs to represent up to 50% of shipments in fiscal 2026, a shift it anticipates will support higher average selling prices and improved margins over time.
Despite the earnings beat, HP narrowed its full-year non-GAAP EPS guidance to a range of $2.90 to $3.10, pulling back from a prior upper end of $3.20. Free cash flow guidance of $2.8 billion to $3 billion was left unchanged, with both EPS and free cash flow now expected to come in solidly within their respective ranges.
Management also revised its second-half revenue outlook, now projecting the period to come in roughly equal to the first half, compared to earlier expectations of a sequential moderation.
Bank of America analysts, who reiterate an Underperform rating on the stock, attributed the quarter's strength in part to demand pull-ins. The analysts flagged slower PC unit growth, memory cost pressure, and uncertainty around a leadership transition as ongoing concerns. The company is in the process of finding its new CEO.
Increasing costs for memory and storage chips are expected to weigh on margins through the remainder of fiscal 2026. Analysts estimate these input cost headwinds could reduce non-GAAP earnings by approximately $0.30 per share as lower-cost strategic inventory is drawn down.
In the Print segment, revenue was flat year-over-year with hardware units down 7%. Operating margins came in at 18.3% in the quarter, though the company guided full-year Print margins to come in solidly within the long-term range, stepping back from prior guidance that pointed to performance near the top of that range.