HP Inc (NYSE:HPQ) is expected to hold its full-year guidance steady when it reports fiscal third-quarter results on August 26, even as mounting memory chip costs squeeze margins in its Personal Systems business, according to Bank of America.
The bank's analysts see Personal Systems revenue coming in slightly ahead of HP's own guidance, driven by pricing actions and residual demand pull-in, but expect operating margin pressure in the segment to keep building through the back half of the fiscal year.
Bank of America flagged the durability of Personal Systems demand, the supply of memory chips, and the pace of actions to offset memory cost headwinds as the main points of investor debate heading into the print.
For the fiscal fourth quarter, HP has guided Personal Systems margins to their "trough" due to pricing dynamics and a seasonally higher mix of consumer sales, with margins expected to normalize in the first half of fiscal 2027 as pricing actions take hold and easier revenue and margin comparisons kick in.
Bank of America expects HP to guide fourth-quarter revenue down low-single-digit percent due to pull-ins, with Personal Systems margins slightly below 4%, Print margins near the midpoint of the long-term range at roughly 17.5%, and earnings per share of $0.65 to $0.75. The bank said it does not expect a material update on HP's ongoing CEO search.
Bank of America reiterated its Underperform rating on HP, citing slower PC unit growth, margin pressure from memory costs, and uncertainty stemming from the company's leadership transition. Its price objective remains $18, based on 6 times its calendar 2027 EPS estimate of $3.06.
Bank of America expects Personal Systems revenue to rise 8% year-over-year in the fiscal third quarter, better than HP's guidance, before falling low-to-mid-single-digit percent in the fourth quarter on demand pull-in and consumer exposure. It modeled margins at 4.3% and 3.9% for the two quarters, the trough on consumer mix and lagging pricing. Print margins should stay near the low end of HP's 16%-19% range this quarter, improving to 17.5% in the fourth, leaving full-year margins at 17.6%.