HP CFO Karen Parkhill reviewed a strong Q1, marked by 7% revenue growth and EPS at the high end of guidance, driven by share gains in Personal Systems (PS) and Print. However, Parkhill revised the full-year outlook to reflect rising memory costs and supply constraints, anticipating EPS at the lower end of the annual range. She detailed a mitigation playbook involving securing supply, cost reductions, and price increases. Despite these headwinds, HP remains committed to its long-term strategy, including AI PCs, workforce solutions, and returning 100% of free cash flow to shareholders over time.

Key Takeaways

• Guidance Update: HP revised its full-year EPS expectations to the lower end of the range due to rising memory costs and supply constraints, anticipating moderated revenue growth in the second half.
• Memory Cost Impact: Memory costs are expected to double sequentially from Q1 to Q2, prompting a mitigation strategy focused on pricing actions, cost reductions, and demand shaping.
• Personal Systems Outlook: Despite an expected unit decline in the broader market (high-single-digits to low-teens), HP forecasts mid-single-digit revenue growth driven by pricing, share gains, and attach rates.
• AI PC Penetration: AI PCs represented 35% of shipments in the recent quarter, up from 30% and 25% in prior quarters, signaling growing adoption.
• Print Margins: Print operating margins remain robust, targeting the high end of the 16-19% long-term range, supported by cost discipline and a shift toward profitable units like Big Tank.
• Free Cash Flow Focus: HP maintained its free cash flow guidance despite headwinds, leveraging working capital management and dollar growth in PS to offset unit declines.
• Cost Savings Program: The company is accelerating its $1 billion AI-enabled cost savings program, aiming for $300 million in savings this fiscal year.
• Capital Allocation: HP remains committed to returning roughly 100% of free cash flow to shareholders over time, having returned ~$19 billion over the last five years.

Q&A

Erik W. Woodring (Morgan Stanley): Can you give us a post-mortem on the January quarter and how that bleeds into your 2026 outlook?

• Karen L. Parkhill: HP delivered 7% revenue growth and high-end EPS in Q1; however, due to rising memory costs and supply constraints, the company now expects EPS to be at the lower end of the annual range with moderated revenue growth in the second half.

Erik W. Woodring (Morgan Stanley): How do you ensure access to memory supply in this constrained environment, and is it enough?

• Karen L. Parkhill: HP is leveraging long-term agreements, qualifying new low-cost suppliers, and strategically building inventory for key platforms, providing confidence in meeting supply needs for the year.

Erik W. Woodring (Morgan Stanley): With memory costs doubling sequentially, why not assume a more significant pricing increase to offset this?

• Karen L. Parkhill: The company expects unit demand declines but still anticipates revenue growth by using a mitigation playbook that includes pricing increases, driving share gains, and increasing attach rates for non-memory affected businesses.