HP tops quarterly forecasts and raises full-year outlook despite premarket share decline

HP Inc (NYSE:HPQ) delivered third-quarter results ahead of analyst expectations and lifted its full-year earnings guidance, although shares fell around 9% in premarket trading on Thursday following an 18.5% gain over the previous month.

Adjusted earnings per share came in at $0.83, comfortably above the analyst consensus of $0.66, while revenue increased 12.5% year on year to $15.7 billion, exceeding expectations of $14.34 billion. The quarter also benefited from a $0.11 favourable contribution from tariff refunds.

HP raised its adjusted earnings guidance for fiscal 2026 to between $3.19 and $3.29 per share. The midpoint of $3.24 is above the current analyst consensus of $3.04, reflecting confidence in the company’s performance heading into the remainder of the year.

“In the third quarter we increased both total sales and share in premium products and continued to attract new customers with innovations in WXP, Print, workstations and AI PCs,” said Bruce Broussard, Interim CEO.

Personal Systems growth supported by premium products and AI PCs

HP’s Personal Systems division generated revenue of $11.8 billion, representing an 18% increase from the same period last year. Although total unit shipments declined 16%, the revenue performance reflected a greater contribution from higher-priced and higher-margin products, including AI-enabled PCs.

Commercial Personal Systems revenue climbed 22%, while the Consumer business recorded growth of 10%.

The division’s operating margin came in at 4.6%, compared with 5.2% in the previous quarter, as higher commodity and memory costs moved ahead of pricing increases.

Printing revenue reached $3.9 billion, down 2% year on year, while supplies revenue decreased 3%.

HP raises earnings and cash flow guidance

For the fiscal fourth quarter, HP expects adjusted earnings per share of between $0.69 and $0.79. The forecast incorporates an estimated $0.08 favourable impact from tariff refunds.

The company also increased its fiscal 2026 free cash flow outlook to between $3.0 billion and $3.2 billion, providing additional support for its capital allocation strategy.

HP generated $1.6 billion of free cash flow during the third quarter and returned $574 million to shareholders. This comprised $300 million of share repurchases and $274 million of dividend payments.

The company finished the quarter with gross cash of $4.2 billion.

Analysts focus on memory costs and PC margins

Despite HP’s stronger results and upgraded guidance, Bank of America highlighted several areas it believes could create pressure on performance.

Analysts said they “see the outlook as challenged by rising memory costs, demand elasticity from higher pricing and F4Q PS operating margin expected below F3Q.”

The bank maintained its Underperform rating, pointing to “slower PC unit growth, continued core (ex-tariff) margin pressure, and leadership-transition uncertainty.”

Nevertheless, HP’s double-digit revenue growth, expansion in premium and AI-related products, higher full-year earnings guidance and stronger cash flow expectations provide positive momentum as the company enters the final quarter of fiscal 2026.

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