Key Takeaways
- HPQ shares plunged 9.3% after hours to $27.68, even after surpassing earnings and revenue projections.
- The company delivered EPS of $0.83 versus analyst expectations of $0.66, while revenue reached $15.7B against the $14.34B forecast.
- Unit volumes in personal systems contracted 16%, with consumer segment volumes declining 19%.
- Ongoing memory chip supply constraints, referred to as “RAMageddon,” are hampering PC and laptop demand.
- The company increased its fiscal year EPS guidance to a range of $3.19-$3.29, up from the prior $2.90-$3.10 projection.
Shares of HP Inc (HPQ) tumbled 9.3% during after-hours trading Tuesday, sliding to $27.68, following the release of the company’s third fiscal quarter financial results covering the period through July.
The decline caught many observers off guard, particularly since HP exceeded expectations on both the top and bottom lines. Earnings per share reached $0.83, topping Wall Street’s $0.66 projection by $0.17. Meanwhile, quarterly revenue totaled $15.7 billion, significantly surpassing the $14.34 billion consensus forecast.
Shares had finished regular trading at $30.52 before the extended-hours decline commenced.
The company’s personal systems segment, which primarily encompasses laptop products, powered the revenue outperformance. This division generated $11.8 billion compared to analyst projections of $10.6 billion.
The printing division contributed $3.9 billion in revenue, aligning closely with expectations though modestly trailing the $4.0 billion recorded during the comparable quarter last year.
Tariff-related refunds also provided an earnings lift. HP disclosed that these refunds contributed a favorable 11-cent per-share impact. However, even accounting for this benefit, the company’s core performance exceeded analyst forecasts.
Volume Metrics Paint a Darker Picture
While revenue figures impressed, unit volume metrics revealed underlying weakness. Personal systems unit volumes contracted 16% year-over-year during the quarter. Consumer segment volumes experienced an even steeper decline of 19%.
This represents a significant acceleration in the downturn compared to the previous quarter, when personal systems volumes fell 7% and consumer volumes decreased 8%.
Print hardware volumes declined 7%, showing marginal improvement versus the prior quarter’s 8% contraction.
The primary driver behind these challenges is the phenomenon market observers have dubbed “RAMageddon.” Artificial intelligence data centers are absorbing memory chip inventory at unprecedented rates, constraining availability for PC manufacturers like HP. Since memory represents a substantial cost component in laptop and desktop production, reduced supply has tightened availability and elevated prices.
Given that HP’s PC and laptop operations account for approximately 70% of consolidated revenue, the memory supply squeeze delivers a particularly painful blow to the business.
Analyst Community Grows More Reserved
Wall Street sentiment toward HPQ has cooled considerably. Just 2 of the 19 analysts monitored by FactSet currently maintain Buy ratings on the stock. This represents a decline from 7 of 19 analysts holding Buy ratings two years earlier.
CFRA analyst Brooks Idlet had expressed caution before the earnings release, stating the firm anticipated “a worsening decline in FY27 as memory costs increase.” He observed that continued PC price increases could render HP’s offerings “harder to justify” for potential customers.
The company has implemented price increases to compensate for elevated memory expenses, while enterprise demand for Windows 11 and AI-enabled systems has offered some support. However, this favorable trend appears to be losing momentum.
On a brighter note, HP elevated its full-year earnings guidance. The company now projects fiscal 2026 EPS between $3.19 and $3.29, representing an increase from the previous $2.90 to $3.10 range. The analyst consensus had been positioned at $3.04.
Year-to-date, HP’s stock has advanced approximately 10%, though it remains roughly 20% beneath its 2024 high near $38 per share.
Over the past 90 days, HP has received 8 upward EPS revisions and 2 downward adjustments, while maintaining a “good performance” Financial Health rating according to InvestingPro.
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