HP Inc. (HPQ) Stock Falls Despite Strong Q2 Earnings Beat — What Happened?

Key Highlights

• HP delivered Q2 adjusted earnings per share of $0.86, surpassing Wall Street’s $0.71 consensus by 21%
• Quarterly revenue reached $14.4 billion, reflecting 9% year-over-year growth and exceeding the $14 billion projection
• Personal Systems division generated $10.2 billion in revenue, marking a 13% year-over-year increase
• HPQ shares rose initially on earnings but reversed course, declining in premarket sessions
• HP refined its full-year EPS outlook to $2.90–$3.10, narrowing the previous $2.90–$3.20 range

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HP surpassed Wall Street’s expectations across both revenue and earnings in its fiscal second quarter, yet shares failed to maintain their early momentum. HPQ traded down approximately 1.5% in premarket activity Thursday morning, despite posting solid financial results.

HP Inc., HPQ

The tech giant delivered adjusted earnings per share of $0.86 for the quarter ending April 30, significantly outpacing Wall Street’s $0.71 projection. Quarterly revenue of $14.4 billion similarly exceeded analyst forecasts of $14 billion.

This represents a 9% revenue increase compared to the corresponding quarter last year — an impressive achievement for a company managing through a complex cost landscape.

Personal Systems Division Powers Growth

The Personal Systems segment emerged as the clear winner, delivering $10.2 billion in revenue — a 13% year-over-year gain that surpassed analyst expectations of $10 billion. Commercial PS revenue climbed 14%, while Consumer PS advanced 10%.

Interestingly, unit shipments painted a contrasting picture. Overall PC unit volumes declined 7%, with both Consumer and Commercial segments dropping approximately 7–8%. The revenue growth despite lower volumes suggests effective pricing strategies are driving results.

The Printing division generated $4.2 billion in revenue, essentially unchanged from last year but marginally above the $4.1 billion analyst estimate. Consumer Printing revenue decreased 10%, while Commercial Printing remained stable. Supplies revenue inched up 1%.

Memory Cost Challenges Continue

Elevated memory costs have remained a significant challenge for HP and the wider tech hardware sector. Memory demand driven by AI infrastructure expansion has significantly exceeded available supply, driving costs upward and compressing margins industry-wide.

HP has implemented price increases to counterbalance these pressures. The approach seems to be delivering results, particularly on the top line.

Operating margins illustrated the ongoing cost challenges, with Personal Systems achieving 5.2% and Printing reaching 18.3%.

The company generated free cash flow of $0.8 billion during the quarter, alongside operating cash flow of $0.9 billion. HP distributed $374 million to shareholders through dividends and share repurchases, including $274 million in dividends at $0.30 per share.

The quarter concluded with $3.7 billion in gross cash on the balance sheet.

Interim CEO Bruce Broussard highlighted advancements in AI-enabled PCs, Z workstations, and AI-powered printing solutions as indicators that the company is positioning itself for sustained future growth.

CFO Karen Parkhill emphasized the company is “executing with discipline in a dynamic environment” and leveraged the strong two-quarter performance to refine its annual projections.

For Q3, HP projects non-GAAP EPS in the range of $0.61–$0.71. For the complete fiscal year 2026, the company revised its non-GAAP EPS guidance to $2.90–$3.10, tightening the previous $2.90–$3.20 range. The company also maintained its free cash flow projection of $2.8–$3.0 billion for the year.

During its February guidance, HP had indicated expectations for results landing “closer to the low end” of its range. The revised outlook demonstrates increased confidence.

GAAP EPS for Q2 registered at $0.49, improving from $0.42 in the prior year but falling short of the company’s guided range of $0.52–$0.58.

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