---
title: "HP's Q1 revenue grew by 7%, exceeding expectations, but the rise in storage chip prices dragged down performance outlook, causing a nearly 7% drop in after-hours stock price | Earnings report insights"
description: "HP's net revenue for the first quarter of fiscal year 2026 was $14.44 billion, a year-on-year increase of 6.9%, exceeding analysts' expectations. However, the company expects the non-GAAP earnings per"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/276803336.md"
published_at: "2026-02-25T00:08:09.000Z"
---

# HP's Q1 revenue grew by 7%, exceeding expectations, but the rise in storage chip prices dragged down performance outlook, causing a nearly 7% drop in after-hours stock price | Earnings report insights

> HP's net revenue for the first quarter of fiscal year 2026 was $14.44 billion, a year-on-year increase of 6.9%, exceeding analysts' expectations. However, the company expects the non-GAAP earnings per share for the second quarter to be in the range of $0.70 to $0.76, with a median of $0.73, which is below the market expectation of $0.75. CFO Karen Parkhill stated that as memory costs continue to rise, the company maintains its full-year guidance but expects actual results to "lean towards the lower end of the range."

HP released its fiscal Q1 2026 results, with net revenue of $14.44 billion, a year-on-year increase of 6.9%, exceeding analysts' expectations of $13.9 billion by approximately 3.2%; non-GAAP earnings per share were $0.81, up 9.5% from $0.74 in the same period last year, also surpassing the market consensus expectation of $0.77 by about 5.3%.

**The core engine driving the better-than-expected performance comes from the personal systems business, with the PC division's revenue growing strongly by 11% year-on-year to $10.25 billion, where consumer PCs recorded a high growth rate of 16%, with the continuous expansion of AI PCs being an important driving force.**

However, the printing business saw revenue decline by 2.2% year-on-year to $4.19 billion, with consumer printing shrinking even more significantly by 8%. **What worries investors even more is the forward guidance. The company expects non-GAAP earnings per share for Q2 to be in the range of $0.70 to $0.76, with a midpoint of $0.73, which is below the market expectation of $0.75.**

CFO Karen Parkhill candidly stated that as memory costs continue to rise, the company maintains its full-year guidance but expects actual results "to lean towards the lower end of the range." Interim CEO Bruce Broussard characterized the current situation as "facing industry-level headwinds."

After the earnings report was released, HP's stock price quickly fell in after-hours trading, with a decline approaching 7%.

## Outlook: Rising memory prices are the biggest variable, guidance midpoint below expectations

The biggest disappointment in this earnings report from the market focused on the forward guidance.

**The Q2 non-GAAP earnings per share guidance range is $0.70 to $0.76, with a midpoint of $0.73, which is below the market expectation of $0.75; the GAAP earnings per share guidance range is $0.52 to $0.58.**

Management clearly identified "rising memory costs" as the most significant macro headwind, with the CFO stating that while the company is "good at dealing with headwinds," in a "dynamic environment," it currently tends to position the full-year results at the lower end of the guidance range.

**For the full year, the company maintains its non-GAAP earnings per share guidance range of $2.90 to $3.20 for fiscal 2026, with a midpoint of $3.05 slightly above the market expectation of $3.00, but the wording of "tendency towards the lower end of the range" essentially constitutes a mild downward adjustment of expectations. The full-year GAAP earnings per share guidance is $2.47 to $2.77.**

**Analysts currently expect HP's revenue to decline by 2.1% year-on-year over the next 12 months.** Between the short-term catalysts of AI PCs and the mid-term pressure of memory costs, HP's path to valuation recovery still faces significant resistance.

## Personal Systems: AI PCs drive better-than-expected growth, but structural pressures remain

The personal systems business is the biggest highlight of this quarter and the only core segment to achieve double-digit growth.

**Quarterly revenue was $10.25 billion, a year-on-year increase of 11% (growing 9% after excluding exchange rate effects), exceeding analysts' expectations of $9.76 billion by about 5%.** \*\*

From a segmentation perspective, commercial PC revenue grew by 9%, while consumer PCs grew by 16%; in terms of shipment volume, total unit volume increased by 12% year-on-year, with consumer PC unit volume growing by 14% and commercial PCs by 11%.

The continued penetration of AI PCs is the key driver behind the better-than-expected performance of personal systems this quarter. **HP's management emphasized "the sustained momentum of AI PCs" multiple times in the earnings report, characterizing it as a core execution lever of the "future work strategy."**

**From an industry background perspective, the PC replacement cycle for enterprise customers is accelerating, coupled with the impending end of support for Windows 10, which has provided a solid demand foundation for the commercial PC market in the short term.**

However, from a profitability quality standpoint, the operating profit margin of the personal systems business is only 5.0%, which is relatively low-margin, limiting the impact of significant growth on overall profits.

**Additionally, the cyclical rise in storage chip prices is eroding the cost side of this business, which is also one of the direct reasons management has lowered the full-year expectations to the lower end.**

## Printing Business: High Profit Margins Cannot Conceal Ongoing Shrinkage Issues

The printing business contributed a high operating profit margin of 18.3% this quarter, serving as an important stabilizer for overall profitability, but the revenue decline is becoming increasingly unavoidable.

**Quarterly printing revenue was $4.19 billion, down 2% year-on-year (a 3% decline at constant exchange rates), with consumer printing down 8%, commercial printing down 3%, and core consumables revenue slightly down 1%, while total hardware shipments fell by 6%.**

**From a longer-term perspective, HP's commercial printing business has averaged a year-on-year decline of 3.3% over the past two years, indicating structural contraction pressures facing this business.**

The accelerated adoption of digital office solutions and the long-term decline in enterprise printing demand have caused this once "money-printing machine" business to gradually lose its growth momentum. Although high profit margins can still contribute a considerable profit pool to the group, the drag effect on revenue growth is becoming increasingly evident.

## Cash Flow and Capital Allocation: Low Free Cash Flow, Buyback Efforts Continue

This quarter, HP generated $383 million in cash from operating activities and $175 million in free cash flow, which, compared to over $14.4 billion in revenue, results in a free cash flow conversion rate of only about 1.2%, which is relatively low and on par with the same period last year.

**Despite limited cash generation capacity, HP has maintained an active capital return pace.**

This quarter, HP repurchased a total of 13.3 million shares at a cost of $325 million, while also paying a cash dividend of $0.30 per share, totaling approximately $277 million, returning about $600 million in capital to shareholders during the quarter. At the end of the quarter, cash and cash equivalents amounted to $3.2 billion.

Looking ahead for the year, the company expects free cash flow to be between $2.8 billion and $3.0 billion, but has clearly indicated a preference for the lower end of the range. **This statement, combined with expectations of rising storage costs, suggests that cash flow pressure in the second half of the year is worth ongoing monitoring.**

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.