HP Inc (HPQ)

Investment Review After Q2 FY2026 Earnings (2026.05.27)

TL;DR

HP Inc is the #2 global PC + #1 print vendor — Personal Systems (PS) drives ~70% of revenue and Printing (~30%) the lion’s share of profit, with AI PC adoption as the principal mix-shift catalyst. Just reported: Q2 FY26 revenue $14.4B (+9% YoY), non-GAAP OM 7.5%, EPS $0.86 (+21% YoY) — strong beat above the $0.70-$0.76 guide on accelerated memory-cost mitigation. Q3 FY26 guide $0.61-$0.71 EPS with PS margins below long-term range, and FY26 EPS raised to $2.90-$3.10 — solid against a rising-input backdrop. Stock at $25, +30% post last quarter end from $19 close, at 7x P/E(ttm) (range 4x-10x) — deep value priced for memory-cost trough Q4 FY26 with sequential margin recovery into FY27.

Summary

Finding	Assessment
5-Year Stock Return	$25 vs. $25 (5yr ago), flat. TTM OP declined $5.8B→$4,234M. P/E(ttm) 7x (range 4x-10x), deep value but structural growth concerns.
Business Model	Dual-segment: Personal Systems (70%, 5% OM) and Printing (30%, 18% OM). PC + print hardware. ~65% non-US revenue. FYE: October.
Competitive Moat	NARROW Printing supplies lock-in, WXP enterprise platform (5.2M devices, 180 countries), but commoditized PC hardware.
Past 5-YR Drivers	Printing razor/blade (60% of segment profit; 18% OM = 3x PS), Win11 refresh + AI PC adoption (44% of Q2 mix), Future Ready cost transformation + share buybacks (count 1.1B→925M).
Recent Stock Move	$25, vs. $19 (Apr 2026 Q2 close). +30% post Q2 print on EPS $0.86 beat + raised FY26 guide. TTM OP improved to $4,234M.
Revenue Trend	DECELERATING Rev YoY: 9% (Q2 2026) → 6% (Q3 2026E).
Margin Trend	COMPRESSING OM%: 7% (Q2 2026) → 6% (Q3 2026E).
TTM OP Trajectory	DECELERATING TTM OP QoQ: 3% (Q2 2026) → -1% (Q3 2026E). TTM OP $4,234M.
Key Opportunities	AI PC mix 35%→44% (toward 70%+ by FY28); Workforce Solutions WXP managing 5.2M devices; FY26 Plan ~$1B AI-driven savings by FY28; Win11 refresh extending into FY27.
Key Risks	Memory/storage costs rising through H2 FY26 (Q4 PS margin trough); PC unit TAM down high teens H2 CY26; CEO search ongoing (Broussard interim); printing in secular decline.
Catalysts	Q3 FY26 earnings (Aug 2026); permanent CEO appointment; memory cost normalization; HP All-In Plan international expansion; Q4 FY26 margin trough.
P/E(ttm) Valuation	7x, upside 10x (CEO search resolution + memory normalization), downside 5x (deeper PC TAM decline).

Q2 FY2026 Key Data (Feb-Apr 2026), reported 2026.05.27

Revenue $14.4B (+9% YoY, +6% cc). Non-GAAP OM 7.5% (+20bps YoY); EPS $0.86 (+21% YoY) above $0.70-$0.76 guide. TTM OP $4,234M; FCF $0.8B.
PS revenue $10.2B (+13% YoY), OM 5.2%. Commercial +14%, Consumer +10%; AI PC mix jumped 35%→44% of shipments. Print $4.2B flat, OM 18.3%; 3D +DD 5th straight Q.
Q3 FY26 EPS guide $0.61-$0.71; FY26 raised to $2.90-$3.10. FCF $2.8-$3.0B maintained. 8th consecutive Q of top-line growth; $374M returned via dividends + buybacks.

Key Takeaways from Earnings Call

Memory cost mitigation playbook is working — but margins still trough in Q4 FY26. Memory/storage secured for FY26 via LTAs + new supplier qualifications + strategic inventory + differentiated repricing. CFO Karen Parkhill: “we would expect Q4 to be a low point, followed by sequential improvement into next fiscal year.” PS OM expected below long-term range for remainder of FY26.
PS growth engine: AI PC mix accelerating + Windows 11 refresh extends through CY26. AI PC shipments jumped 35%→44% in Q2; expected 60-70% by FY27 and >70% by FY28. Win11 refresh: 30% of install base still on Win10. APJ +18% cc and EMEA +6% cc led growth; 2-3% of Commercial PS growth came from pull-forward ahead of price hikes.
FY26 EPS raised to $2.90-$3.10; FCF $2.8-$3.0B; ~100% of FCF returned to shareholders. Q2 returned $374M (dividends + $100M buyback of 5.2M shares). Diluted share count ~925M (down from 1.1B 5 years ago). FY26 Plan targets ~$1B in gross annualized run-rate cost savings by end of FY28 via AI-driven productivity; voluntary early retirement plan launched in Q2.
AI at the edge is the multi-year strategic bet — HP Imagine product wave + HP IQ + Workforce platform. Bruce Broussard (Interim CEO): “customers are building AI at the edge using smaller open source and proprietary models.” New Z Workstations, AI Stations, AI-enabled LaserJet series, HP IQ (cross-product intelligence layer), HP NearSense. WXP manages 5.2M devices across 180 countries; 150+ AI software ecosystem partners.

Key Segments and Revenue Mix (FY2025)

Segment	FY2025 Revenue	% of Total	Key Details
Personal Systems	$38.5B	70%	Commercial PCs (71% of PS), Consumer PCs (29%). Win11 refresh + AI PC adoption driving growth. OM: 5.3%
Printing	$16.7B	30%	Supplies (65%), Commercial (28%), Consumer (7%). Secular decline in hardware offset by subscriptions + industrial print. OM: 18.7%
Total FY2025	$55.2B	100%	~65% non-US revenue. FYE: October. Interim CEO: Bruce Broussard.

Business Model

SUPPLIERS

Intel, AMD, Qualcomm (CPUs)
Samsung, SK Hynix, Micron (DRAM/NAND)
Display panel makers
Canon (print engines)
Component suppliers globally

Components / Engines →

HP INC

PC design & manufacturing
Printer hardware & supplies
Workforce Solutions (WXP)
AI PC innovation
Subscription services (All-In Plan)
$55B revenue, ~$3.8B OP

PCs / Printers / Services → $ Revenue

CUSTOMERS

Enterprise & commercial (71% of PS)
Consumers (29% of PS)
Print supplies recurring base
Channel partners & distributors
190+ countries

Moat Assessment: NARROW

Printing supplies lock-in provides recurring revenue. Installed base creates captive 18%+ margin supplies market. Base is declining + third-party competition growing. All-In Plan offsets but doesn’t reverse secular decline.
Scale + distribution advantage in PCs. #1 or #2 global PC vendor with deep channel + enterprise reach. WXP managing 5.2M devices across 180 countries creates enterprise stickiness. PCs commoditized vs Dell/Lenovo/Apple.
Brand recognition but limited pricing power. HP brand globally known but competitors offer comparable products. PC TAM down high teens H2 CY26 as pricing rises — pricing-power-limited. Edge AI + WXP are new moat-builders.

Stock vs. Earnings — 5-Year Performance

Stock currently at $25, vs. $25 (5 years ago). Flat 5-year despite $15B+ cumulative FCF returned via buybacks + dividends. Peaked $33 late 2024, troughed $19 Q2 FY26 close, +30% post Q2 print.
TTM Operating Profit declined from $5.8B to $4,234M. Persistent PS margin pressure from DRAM/NAND + Print secular decline. Q2 FY26 first sequential TTM OP improvement (+3% QoQ) on mitigation.
P/E(ttm) range of 4x–10x reflects deep value but also structural concerns. Current 7x sits below mid-range despite the rally. Low multiple reflects mature hardware view offset by strong capital return.

Stock Price vs TTM Operating Profit (Since 2020)

Past 5-Year Key Drivers

Printing razor/blade model generates 60% of segment profit. Print OM 18% is 3x PS margin from high-margin consumables. Print revenue declines 3-4% annually but still produces $3B+ OP.
Windows refresh + AI PC adoption drive PS revenue swings. Win11 drove +6.5% PS growth FY25, +13% Q2 FY26. AI PCs 44% of shipments. PS OM thin at 5-6%, memory-sensitive.
Future Ready cost transformation + aggressive capital return. FY26 Plan targets ~$1B savings by FY28 via AI. Share count cut 1.1B→925M over 5 years, boosting EPS despite flat OP.

Quarterly Key Metrics

USD	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26E
Quarter End	Apr 2024	Jul 2024	Oct 2024	Jan 2025	Apr 2025	Jul 2025	Oct 2025	Jan 2026	Apr 2026	Jul 2026
Stock	$28	$32	$33	$31	$27	$24	$26	$23	$19	$25
Stock QoQ	+1%	+17%	+2%	-7%	-14%	-10%	+10%	-14%	-15%	+30%
Rev YoY	-1%	+2%	+2%	+2%	+3%	+3%	+4%	+7%	+9%	+6%
OM%	9%	8%	9%	7%	7%	7%	8%	7%	7%	6%
R40 (RevYoY+OM%)	8%	11%	10%	10%	11%	10%	12%	14%	16%	12%
TTM OP ($M)	$4,644	$4,567	$4,520	$4,398	$4,234	$4,140	$4,109	$4,120	$4,234	$4,193
TTM OP QoQ	+0%	-2%	-1%	-3%	-4%	-2%	-1%	+0%	+3%	-1%
FCF/OP	67%	77%	70%	74%	63%	69%	68%	70%	89%	76%
Debt/EBITDA	1.6x	1.6x	1.7x	1.7x	1.9x	1.7x	1.7x	1.7x	1.6x	1.6x
P/E(ttm)	8x	10x	10x	9x	8x	8x	8x	7x	6x	7x

Recent Stock Performance & Drivers

Stock currently at $25, vs. $19 (Apr 2026 Q2 close). The stock rallied +30% post Q2 print on EPS $0.86 beat (vs $0.70-$0.76 guide), +13% PS growth, and raised FY26 EPS to $2.90-$3.10. CEO search continues with Broussard as interim.
P/E(ttm) re-expanded from 5x (Q2 close) to 7x as the EPS beat + FY26 guide raise relieved memory-cost panic. Q3 EPS $0.61-$0.71 baked in; market positioning for Q4 trough then sequential improvement into FY27.
FCF strong at 92% of OP; $374M returned to shareholders in Q2. FY26 FCF $2.8-$3.0B maintained. Dividends $0.30/share = $274M; $100M buyback = 5.2M shares. ~100% of FCF return commitment intact subject to under-2x leverage; Debt/EBITDA 1.7x.

Opportunities

AI PC adoption accelerating — 44% of Q2 shipments, headed to 70%+ by FY28. AI PCs drive higher ASPs + premium mix. HP Imagine launched Z Workstations + AI Stations + HP IQ. 150+ AI software partners (Zoom, CrowdStrike).
Workforce Experience Platform scaling enterprise stickiness. WXP manages 5.2M devices across 180 countries with AI-driven endpoint mgmt. All-In Plan expanding outside US next FY. Industrial Graphics 11th straight Q growth.
FY26 Plan targets ~$1B in gross annualized savings by FY28 via AI. Voluntary early retirement in Q2 restructuring. AI agents automating order entry + sales returns + software dev. OpEx flat as % of revenue.

Challenges

Memory/storage costs rising sequentially through H2 FY26. Q2 inputs rose as expected; Q3 + Q4 further hikes. PS OM below long-term range remainder of FY26; Q4 is trough. Resin + oil also pressuring Print.
PC unit TAM down high teens H2 CY26 + 2-3% Q2 pull-forward. Industry experts: unit TAM down high teens H2 CY26 as prices rise. ~2-3% of Q2 Commercial PS was pull-forward. Q3 guided below-seasonal revenue.
CEO transition creates strategic uncertainty. Broussard remains interim; board engaged external search firm, no timeline. Criteria: long-term value, complex environment, multi-segment global experience. Permanent CEO is key de-risking catalyst.

Next 12 Months

Q3 FY26 EPS $0.61-$0.71; FY26 raised to $2.90-$3.10. Q3 PS below-seasonal on pull-forward; Print near low end of long-term range. FCF $2.8-$3.0B maintained. Q4 is margin trough; sequential improvement into FY27.
CEO search resolution is the key de-risking catalyst. Proven external CEO could re-rate stock toward 9-10x as uncertainty clears. Prolonged search or internal pick may delay re-rating.
Memory cost normalization timing — CY27 supply visibility. Management qualifying suppliers for FY27; LTAs + silicon diversity in place. DRAM/NAND price stabilization improves PS OM immediately. Speed varies by segment + geo.

Next 12-24 Months

Win11 refresh cycle extending into FY2027. 30% of install base still on Win10; APJ + EMEA refresh now on par with North America. AI PC penetration 60-70% FY27, >70% FY28, sustaining ASP growth.
Edge AI is the structural growth theme — HP IQ + AI Stations + 150 partners. Cloud costs + latency + privacy + sovereign-AI push workloads to edge. HP as “trusted intelligent edge provider” via AI PCs + Z Workstations + WXP.
Print transformation toward subscriptions + Industrial. All-In Plan expanding outside US next FY. Tank printer DD unit growth + A4 Office share gains. Industrial Print 11 straight Q growth; 3D DD 5 Qs. Analog-to-digital is structural.

Core Metrics Scorecard

	Q4'21	Q1'22	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26E
Quarter End	Oct21	Jan22	Apr22	Jul22	Oct22	Jan23	Apr23	Jul23	Oct23	Jan24	Apr24	Jul24	Oct24	Jan25	Apr25	Jul25	Oct25	Jan26	Apr26	Jul26
R40 > 40%
R40 accelerate	✅	✅						✅	✅	✅	✅	✅			✅		✅	✅	✅
TTM OP QoQ > 10%
TTM OP QoQ accelerate							✅	✅	✅				✅			✅	✅	✅	✅
TTM FCF/OP > 60%	✅	✅	✅	✅	✅			✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Debt/EBITDA < 3.5	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Total passes	3	3	2	2	2	1	2	4	4	3	3	3	3	2	3	3	4	4	4	2
Stock QoQ	-9%	+39%	+4%	-13%	-25%	+8%	+9%	+6%	-14%	+18%	+1%	+17%	+2%	-7%	-14%	-10%	+10%	-14%	-15%	+30%
P/E(ttm)	6x	8x	8x	7x	5x	6x	7x	8x	7x	8x	8x	10x	10x	9x	8x	8x	8x	7x	6x	7x

R40 never crosses 40% — HP is structurally below the growth threshold. Revenue +2-9% + OM 6-8% keeps R40 in 7-16% range. Growth criteria (R40 >40%, TTM OP QoQ >10%) are structurally impossible — max score capped at 4 of 6.
FCF/OP and Debt/EBITDA pass every quarter (20/20 each). Reliable FCF + conservative leverage provide a valuation floor. Best stock periods (Q1'22 +39%, Q3'24 +17%, Q3'26E +30%) coincided with 3-4 pass quarters + R40 acceleration.
Q3 FY26E drops back to 2 passes on TTM OP QoQ deceleration. Q2 FY26 hit 4 passes (R40 accelerate + OP QoQ accelerate + FCF/OP >60% + Debt/EBITDA <3.5). Q3E slips as memory pressure peaks in Q4. Watch FY27 for 4-pass return post-trough.

Chart: R40 vs Stock Price (Since 2020)

Chart: Scorecard Total Passes vs Stock Price (Since 2020)

Q1 FY2026 Key Data, reported 2026.02.24

Revenue +7% YoY, OM 6%, TTM OP $3.59B; R40 +13%. FCF/OP 80%, Debt/EBITDA 1.9x. TTM OP compressed from $4.30B (Mar 2024) as memory costs roughly doubled.
AI PC adoption at 35%+ of shipments and growing. EliteBook G1a launched with built-in keyboard intelligence. OpenAI partnership for enterprise AI agent deployment positions HP at the forefront of edge AI.
Q2 FY2026 guided EPS $0.70-$0.76; FY2026 EPS $2.90-$3.20 at the lower end. FCF $2.8-$3.0B maintained. Memory cost pressure peaks in H2 with 100%+ sequential increases. $600M returned to shareholders in Q1.

Key Takeaways from Earnings Call

AI PC + Win11 refresh is the multi-quarter revenue tailwind. AI PC mix at 35%+ of shipments drives higher ASPs and premium mix shift; HP launched the EliteBook G1a with intelligence built into the keyboard. Win11 refresh combined with AI PC demand creates a multi-quarter revenue tailwind. OpenAI partnership for enterprise AI agent deployment positions HP at the forefront of edge AI.
Workforce Solutions + cost-out are the durable margin levers. WXP manages 50M endpoints and processes 1TB daily. Consumer subscriptions (All-In Plan) growing double-digit; industrial print grew for 10th consecutive quarter. FY2026 Plan targets $1B AI-driven cost savings by FY2028.
Memory costs + CEO transition + printing decline are the bear case. Memory/storage now ~35% of PC BOM (vs 15-18%) — PS margins below long-term range for remainder of FY2026; PC unit TAM expected to decline double-digits in CY2026. CEO Enrique Lores departed after 36 years; Bruce Broussard interim. Printing revenue declined 3.7% in FY2025.

Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.

Disclaimer: This report is for educational purposes only. NO investment advice.