HP Delivers Surprise Beat but Signals Trouble Ahead as Memory Costs Double

By Jordan Chussler Published Feb 25, 9:29AM EST

Quick Read

HP (HPQ) beat Q1 estimates with $0.81 EPS and $14.44B revenue. AI PCs reached 35% of total PC shipments.
DRAM and NAND prices rose 100% sequentially pushing memory costs to 35% of bill of materials. HP operating income fell 10.2%.
HP guided toward the low end of its $2.90-$3.20 full-year EPS range due to memory cost headwinds.

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HP Delivers Surprise Beat but Signals Trouble Ahead as Memory Costs Double — © 24/7 Wall St.

HP Inc. (NYSE:HPQ | HPQ Price Prediction) reported after the bell on Feb. 24, and the stock initially dipped to around $16.91 in the hour after filing before recovering. Shares were last trading at $18.20.

AI PCs Lead, Margins Lag

The headline numbers were solid. HP posted non-GAAP EPS of 81 cents versus the 77-cent consensus — a beat of about 5% and up 9.5% from the year-ago period. Revenue of $14.44 billion came in roughly $500 million above estimates, growing 6.9% year over year. Personal Systems was the engine: AI PCs reached 35% of total PC shipments in Q1, up from 30% the prior quarter, pushing segment revenue to $10.25 billion, up 11% year over year. Consumer was the standout within that, up 16%.

Margin pressure showed up as expected. Operating income fell 10.2% year over year to $759 million even as revenue grew. The culprit: DRAM and NAND prices rose roughly 100% sequentially, pushing memory and storage costs from 15-18% to approximately 35% of PC bill of materials. Printing continued its structural slide, with revenue down 2% and hardware units down 6%.

An infographic titled 'HP Inc. (HPQ) Q1 FY2026 Earnings' on a dark blue background with white and green text. It details the market reaction with a -2.6% dip and current price of $18.20. Headline numbers show EPS reported at $0.81 (beat expectation of $0.77) and Revenue reported at $14.44B (beat expectation of $13.93B). Sections highlight 'What Stood Out' (Personal Systems $10.25B +11%, AI PC Momentum 35% of PC Shipments, Consumer Growth +16% YoY), 'What Was Good (Strengths)' (AI PCs drive growth, Consumer momentum, EPS improvement), and 'What Was Bad (Concerns)' (Printing segment decline, Operating income fell 10.2%, Memory/storage costs rising). The 'Guidance Snapshot' shows Q2 FY2026 EPS outlook ($0.70-$0.76) and FY2026 Outlook (EPS: $2.90-$3.20, guiding to low end due to cost headwinds). A quote from Bruce Broussard, Interim CEO, is included, followed by 'The Bottom Line' summarizing that HP beat estimates but faces margin pressures and printing decline, with the stock down 18% YTD. — HP Inc. reported stronger-than-expected Q1 FY2026 earnings, beating on both EPS and revenue, primarily driven by Personal Systems growth. Despite the beat, the company faces significant headwinds from a declining printing segment and rising memory costs, leading to a maintained, low-end FY2026 outlook.

Guidance Holds the Range, But Management Signals the Low End

Interim CEO Bruce Broussard kept the tone measured. “We are pleased to report a strong first quarter, highlighted by robust growth in Personal Systems, including the continued momentum in AI PCs. Our performance reflects the strength of our portfolio and our disciplined execution of our Future of Work strategy, even as we navigate industry-wide headwinds,” Broussard said.

HP maintained its full-year non-GAAP EPS range of $2.90 to $3.20 but explicitly guided toward the low end. Q2 non-GAAP EPS is projected at $0.70 to $0.76, a sequential step down from Q1’s $0.81. Management is pursuing a three-pronged mitigation plan: long-term supplier agreements for memory, expanded lower-cost sourcing, and targeted pricing actions, targeting $1 billion in gross run-rate savings by FY2028.

What to Watch From Here

The beat was real, but the market’s muted initial reaction mirrors November’s earnings, when HP also beat and the stock still declined. With shares already down 18% year to date and trading well below its 200-day moving average of $25.02, the path forward depends on whether memory cost pressures stabilize and AI PC demand holds.

Analyst price targets average $22.96, above the current trading price of $18.20. HP guided toward the low end of its full-year EPS range, citing ongoing memory cost headwinds as a key variable for the remainder of the fiscal year.

About the Author Jordan Chussler →

Jordan specializes in a wealth of finance topics, ranging from traditional equities, income investment vehicles and alternative assets to retirement savings, debt-based fixed-income securities and commodities, with a specific focus on gold and other precious metals. He takes pride in combining his personal interests and professional experience in finance and education to help readers increase their financial literacy and make better investment choices. Jordan has worked in digital publishing for 17 years after graduating from Lynn University as a member of both the Kappa Delta Pi International Honor Society and the U.S. Achievement Academy's All-American Scholar Program. He is the investing and banking editor for Money and previously served as managing editor of Weiss Ratings. As a contributing writer for BetterInvesting Magazine, Jordan covered topics focused on the fundamentals of investing, technical and fundamental analysis, mutual funds, debt securities, dividend investing, retirement savings strategies and passive income generation. His bylines can be seen at Nasdaq.com, Apple News, Money, MSN, BetterInvesting Magazine, Money Crashers, TipRanks, the Miami Herald and a dozen other newspapers.