- Revenue Growth: Q1 revenue reached $14.4 billion, a 7% year-over-year increase, driven by a 11% rise in Personal Systems revenue (12% unit growth) due to Windows 11 refresh and AI PC adoption.
- Non-GAAP EPS Performance: Non-GAAP EPS hit $0.81, up 9% YoY, hitting the top of guidance, supported by disciplined operating expenses and cash flow generation ($200 million free cash flow).
- AI PC Momentum: AI PCs accounted for 35% of PC shipments, with the HP EliteBoard G1a launching as the first AI-integrated keyboard PC, reflecting strategic innovation in the workplace.
- Memory Cost Mitigation: Secured long-term agreements and new suppliers to address 100% sequential memory price hikes, with 35% of PC bill of materials now memory, driving cost management priorities.
- Free Cash Flow & Shareholder Returns: Returned $600 million to shareholders in Q1, with $400 million in operating cash flow, targeting $2.8–$3 billion in annual free cash flow despite back-half-loaded performance.
Segment Performance
Personal Systems revenue was up 11%, with 12% unit growth, driven by Win 11 refresh, AI PC adoption, and strong Consumer performance. Print revenue was down 2%, with Consumer revenue down 8% and Commercial revenue down 3%. The company gained share in supplies while increasing pricing to partially offset installed base and usage headwinds.
Guidance and Outlook
The company expects revenue growth in fiscal year '26, driven by pricing actions, share gains in premium categories, and increased attach of higher-margin offerings in Personal Systems. In Print, the company expects the hardware market to decline low single digits in calendar '26, but anticipates growth in Big Tanks and industrial print to offset this decline. HP is maintaining its annual non-GAAP diluted earnings per share guidance range of $2.90 to $3.20 and expects to be closer to the lower end of this range.
Memory Cost Increases and Mitigation Strategies
Memory cost increases are expected to be significant, with current prices up about 100% sequentially, and further increases anticipated in the latter part of the year. The company is working to mitigate these headwinds through product cost actions, company-wide cost actions, and price increases. HP has secured long-term agreements with memory suppliers, which protect its supply coverage.
Valuation and Dividend Yield
With a P/E Ratio of 6.72 and a Dividend Yield of 6.42%, HP Inc.'s stock appears to be reasonably valued. The company's ROIC is 23.29%, indicating efficient capital allocation. The Net Debt / EBITDA ratio is 1.61, suggesting a manageable debt burden. Analysts estimate next year's revenue growth at 1.1%, which is relatively modest.