tapebrief
HPQ · Q4 2025
HPQ · Q2 2026
Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

HPQ · Q1 2026 Earnings

HP Inc.

Reported February 24, 2026

30-second summary

Q1 revenue grew 6.9% YoY to $14.4B and non-GAAP EPS of $0.81 hit the top of the $0.73–$0.81 guide, with Personal Systems units up 12% on Windows 11 refresh momentum. The story is the cost structure: memory costs are guided to roughly double sequentially into Q2 and to represent ~35% of PC BOM for FY26 vs the 15–18% baseline, PS operating margin compressed to 5.0% (below the 5–7% long-term range), and management explicitly flagged FY26 results will land "closer to the low end" of the $2.90–$3.20 EPS range despite reaffirming the numeric guide. The Q1 beat is real but the forward signal is a structural cost shock management expects to persist into FY27.

Headline numbers

EPS

Q1 FY2026

$0.81

Revenue

Q1 FY2026

$14.40B

+6.9% YoY

Gross margin

Q1 FY2026

19.6%

Free cash flow

Q1 FY2026

$0.17B

Operating margin

Q1 FY2026

5.3%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$14.40B+6.9%$14.60B-1.4%
EPS$0.81—$0.93-12.9%
Gross margin19.6%—20.2%-60bps
Operating margin5.3%—6.6%-130bps
Free cash flow$0.17B—$1.50B-88.3%

Guidance

HP reaffirmed full-year FY2026 guidance while Q1 EPS met/beat range; management cautioned results will trend to low end of FY range despite strong start.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
Non-GAAP diluted net EPSQ1 FY2026$0.73 to $0.810.81+$0.00 (top of range)Beat
GAAP diluted net EPSQ1 FY2026$0.58 to $0.660.58in-line (bottom of range)Met

New guidance

MetricPeriodGuideYoY
Non-GAAP diluted net EPSQ2 FY2026$0.70 to $0.76—
GAAP diluted net EPSQ2 FY2026$0.52 to $0.58—

Reaffirmed unchanged this quarter: Non-GAAP diluted net EPS ($2.90 to $3.20), GAAP diluted net EPS ($2.47 to $2.77), Free cash flow ($2.8 to $3.0 billion)

Product revenue

Q1 FY2026
SegmentQ1 FY2026YoY
Personal Systems$10.251B+11.0%
Printing$4.187B-2.0%
Commercial PS$7.253B+9.0%
Consumer PS$2.998B+16.0%
Supplies$2.799B-1.0%
Commercial Printing$1.105B-3.0%
Consumer Printing$0.283B-8.0%

Management tone

Q4 FY25 anchor (disciplined execution, fresh restructuring) → Q1 FY26 anchor (memory crisis, multi-lever mitigation).

The defining shift this quarter is in the source of margin pressure. Last quarter the cost narrative was relatively quiet as PS margin sat at 5.8%. This quarter, memory has emerged as the structural cost shock: management quantified memory costs as guided to be "up 100% sequentially" into Q2 and "roughly 35 percent" of PC BOM for FY26 versus a 15–18% baseline. Karen explicitly noted Q1 memory cost increases were "roughly in line with what we had outlined at the beginning of the year" — the doubling is forward-looking, not realized. Unlike tariffs — which HP could mitigate via geographic shifts — memory is a commodity HP can hedge but not engineer around. Management's framing that "we expect this volatility to remain throughout fiscal 26 and likely into fiscal 27" is the most explicit multi-year cost guidance HP has given.

The FY EPS guidance posture is degraded via the lowest-visibility form of a cut: the numeric range is reaffirmed but management said "at this point we expect to be closer to the lower end of our guidance range" — the print says $3.05 midpoint and the call says $2.90. Investors should treat the operative FY26 EPS as $2.90, not $3.05.

The PS operating margin commentary marks a meaningful concession on the long-term range. After Q4's confidence in the 5–7% range as a corridor with upside, this quarter's "we now expect the PSOP rate to be below our long-term range for the remainder of the year" effectively abandons the range as an FY26 operating reality. Management still reaffirmed the long-term range for the multi-year frame, but the within-year acknowledgment is new and material.

The pricing-and-share-gains framing — "we continue to expect to drive revenue growth in our fiscal year through pricing actions, share gains in premium categories" — now serves a defensive purpose. With the PC unit TAM expected to "decline double digits in calendar year 26," HP is essentially saying it will sacrifice unit growth for ASP to protect margin.

Recurring themes management leaned on this quarter:

Memory cost crisis (100% sequential increase, 35% of PC BOM vs. 15-18% baseline)Multi-lever mitigation playbook (supply LTAs, cost reduction, pricing, demand shaping, product configuration)AI PC and Windows 11 refresh as revenue offsets despite unit TAM declineFront-half-weighted fiscal 2026 earnings trajectoryPricing elasticity management and total cost of ownership justificationPrint margin expansion to high end of range offsetting PS margin pressure

Risks management surfaced:

Memory cost volatility expected to persist through fiscal 26 and into fiscal 27Double-digit PC unit TAM decline in calendar 2026 industry-wideDemand elasticity risk from pricing actions across multiple routes-to-marketTariff uncertainty following U.S. Supreme Court ruling (mitigated by supply chain agility)Fluidity of commodity market creating difficulty in precise forecasting

Answers to last quarter's watch list

Whether Q1 FY26 non-GAAP EPS lands above the $0.77 midpoint — Resolved positively on the print but negatively on the trajectory. Q1 came in at $0.81, top of the range and $0.04 above midpoint. But management's "closer to the low end" framing for the FY range means the operative FY26 EPS is now $2.90 — the -7% YoY case the prior watch list flagged as the downside scenario.
Resolved negatively
Whether HP introduces FY26 revenue guidance during the year — Continue monitoring. HP did not introduce FY26 revenue guidance on this print, maintaining EPS and FCF as the only annual frames. With memory cost volatility now flagged through FY27, expect continued silence.
Continue monitoring
Print hardware unit declines — Resolved positively, relatively. Q1 print hardware units declined 6% YoY, a meaningful moderation from Q4's -12%. This is the first quarter with a sequentially better unit print, supporting management's "pages printed are stable, demand returns later" thesis at least directionally.
Resolved positively
Personal Systems operating margin trajectory above 5.8% — Resolved negatively. PS op margin fell to 5.0% from Q4's 5.8% — not stalled, but compressed below the 5–7% long-term range. Management now expects PSOP "below our long-term range for the remainder of the year." This is the FY26 EPS guide problem in a single data point.
Resolved negatively
AI PC mix and ASP disclosure — Partially resolved. Management referenced AI PC at "35% mix" in tone commentary but the press release did not formally quantify mix or provide ASP detail in a comparable disclosure framework.
Continue monitoring
FY26 plan execution milestones — Continue monitoring. The press release did not provide a Q1-specific update on the FY26 restructuring charge pace or headcount actions.
Continue monitoring
Tariff/trade cost language — Resolved positively on tariff, but a new cost shock replaced it. Management stated they "do not expect to be negatively impacted by the subsequent developments following the [Supreme] court decision." Memory has displaced tariffs as the dominant cost narrative. Status: Resolved positively on tariff specifically; the broader "cost headwinds" watch is now memory-driven.

What to watch into next quarter

Whether Q2 FY26 non-GAAP EPS lands above the $0.73 midpoint — a print at or below $0.70 would force the FY26 guide range to be revised down explicitly, not just reframed via low-end language. Q2 FY25's $0.71 base means even the high end ($0.76) is only +7% YoY despite +11% PS revenue growth — the spread quantifies the memory drag.

Personal Systems operating margin direction — Q1's 5.0% put PS below the long-term range. A Q2 print at or below 5.0% confirms PS margins have a new structural floor through FY26; a recovery toward 5.5% would suggest memory pass-through pricing is working faster than management implied.

Free cash flow run-rate — Q1's $0.175B implies HP needs $2.6–$2.8B across Q2–Q4 to hit the low end of the $2.8–$3.0B guide. A Q2 print below $0.6B would make the FY FCF guide arithmetically untenable and force a cut.

Memory cost commentary — watch for any update on whether memory pricing is normalizing or extending further into FY27. A "longer and worse than expected" framing would push the FY26 operative EPS toward the bottom of $2.90 or below.

Print operating margin sustainability — Q1's 18.3% in the upper half of the 16–19% range is now the segment carrying profitability while PS is pressured. A Q2 step-down below 17% would remove the offset and force the FY26 EPS guide into explicit cut territory.

Whether HP names specific pricing actions and customer pushback — management framed pricing as a key memory offset lever. Demand elasticity is the risk; watch for any quantification of price increases by route-to-market or commentary on order pushouts.

Sources

  1. HP Inc. Q1 FY2026 press release (Form 8-K Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/47217/000004721726000009/hp13126exhibit991q126.htm
  2. HP Inc. Q4 FY2025 Tapebrief brief (prior-quarter watch list, FY26 guidance baseline).
  3. HP Inc. Q1 FY2026 earnings conference call (prepared remarks and Q&A).

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.