HP (NYSE:HPQ) reported record fiscal third-quarter revenue and raised its full-year earnings and free-cash-flow outlook, as growth in its Personal Systems business offset continued pressure in printing markets and rising component costs.
Revenue for the quarter totaled $15.7 billion, up 13% year over year, marking the company’s ninth consecutive quarter of top-line growth. Non-GAAP diluted earnings per share rose 11% to $0.83, including a $0.11 benefit from tariff refunds. Chief Financial Officer Karen Parkhill said earnings excluding the tariff benefit still exceeded the top end of HP’s prior guidance range.
Personal Systems Drives Growth
Personal Systems revenue rose 18% to a record $11.8 billion in the fiscal third quarter. Commercial revenue increased 22%, while consumer revenue grew 10%. Commercial customers accounted for more than 70% of Personal Systems revenue during the quarter.
HP said its strategy of prioritizing higher-value placements, pricing actions, services expansion and premium categories more than offset lower unit volume. The company reported double-digit growth in AI PCs, advanced compute solutions, hybrid systems and workforce solutions.
Personal Systems operating margin was 4.6%, below the company’s long-term range, due to higher commodity costs and variable compensation. HP said repricing and other cost-reduction measures partly offset those pressures.
Interim Chief Executive Officer Bruce Broussard said HP expects AI PCs to account for 50% of its shipment mix by the end of fiscal 2026. Personal Systems President Ketan Patel said AI PCs represented 46% of shipments in the third quarter and that HP expects the mix to reach 60% to 70% in fiscal 2027 and more than 70% in fiscal 2028.
Patel said customers are increasingly considering more capable devices as AI workloads move closer to users and away from solely cloud-based computing. He cited considerations including token costs, security, privacy, latency and enterprise management of AI agents.
- HP gained 2.6 percentage points of share in premium PC categories, according to Patel.
- The company gained 1.8 percentage points of workstation share.
- Peripherals, collaboration offerings and services such as the Workforce Experience Platform contributed about one-third of Personal Systems gross profit.
Print Revenue Declines, While Tank and Industrial Categories Advance
Print revenue declined 2% from a year earlier, or 4% in constant currency, as lower hardware and supplies volumes outweighed contributions from industrial printing, 3D printing and HP’s All-In Plan subscription offering.
Consumer print revenue fell 2%, while commercial print revenue declined 1%. Parkhill cited softness in the North American and Chinese office markets, as well as HP’s focus on profitable unit placement in an aggressive pricing environment. Supplies revenue fell 4% in constant currency, partly reflecting headwinds in the Middle East.
HP continued to expand in tank printers, a category it describes as profit-upfront. The company reported 42% tank-printer unit growth and said it gained share both sequentially and year over year. Broussard said HP gained another four points of share in big-tank markets during the quarter.
Print operating margin was 18.1%, up about one percentage point year over year. The result included a favorable impact from tariff refunds and pricing actions. Excluding tariff refunds, Parkhill said Print margin was at the low end of HP’s long-term 16% to 19% range.
Tariff Refunds, Cash Flow and Updated Outlook
Gross margin was 18.8%, down from the prior year as higher commodity costs and a greater Personal Systems mix weighed on profitability. Pricing, growth in key areas and tariff refunds partly offset those effects. Operating margin was 6.5%; excluding tariff refunds, it was in line with HP’s expectations.
HP generated more than $1.7 billion in cash from operations and approximately $1.6 billion in free cash flow during the quarter. Year-to-date free cash flow exceeded $2.5 billion. The company repaid slightly more than $500 million of debt maturities and returned nearly $600 million to shareholders through dividends and share repurchases during the quarter.
HP increased its fiscal 2026 non-GAAP diluted EPS outlook to $3.19 to $3.29, from a prior range of $2.90 to $3.10. The updated full-year forecast includes an estimated $0.19 favorable impact from tariff refunds. Fourth-quarter EPS is projected at $0.69 to $0.79, including an estimated $0.08 tariff-refund benefit.
The company also raised its fiscal-year free-cash-flow forecast to $3 billion to $3.2 billion.
Component Costs Expected to Pressure Fourth-Quarter Margins
HP expects Personal Systems revenue to grow year over year in the fiscal fourth quarter but decline sequentially, reflecting what Parkhill described as below-seasonal demand amid industry projections for a high-teens decline in PC unit volumes during the second half of the calendar year.
The company expects memory and storage costs to continue rising as a percentage of bill of materials. Personal Systems margin is expected to be lower in the fourth quarter than in the third quarter before improving sequentially in fiscal 2027, according to Parkhill.
Parkhill said the benefit from lower-cost inventory held earlier in the year is “largely behind us” as higher-cost inventory moves through HP’s profit and loss statement. The company expects cost pressures to rise at a slower rate in fiscal 2027 and cited longer-term pricing revisions, product redesigns, platform optimization, premium product mix and higher-margin attached offerings as factors that could support a margin recovery.
For Print, HP expects fourth-quarter revenue in line with historical seasonality and operating margin in the lower half of its long-term range, excluding any tariff refunds. The company said it plans to continue emphasizing tank printers, subscriptions, AI-enabled office products, industrial graphics and cost discipline.
Broussard also said the search for HP’s next chief executive officer is proceeding and that the company is making progress, though he did not provide a timeline.
About HP (NYSE:HPQ)
HP Inc is an American multinational information technology company that designs, manufactures and sells personal computing devices, printers and related supplies and services. Its product portfolio spans consumer and commercial notebooks and desktops, workstations, displays and accessories, as well as an extensive line of printing hardware that includes home, office and production printers. HP also provides consumables such as ink and toner, managed print services, device deployment and lifecycle support, and software for device and print management.
Founded from the original Hewlett‑Packard Company, HP Inc became a separately traded public company in 2015 following a corporate split that created Hewlett Packard Enterprise to focus on enterprise hardware and services.
