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Date

May 27, 2026, 5:30 p.m. ET

Call participants

• Interim Chief Executive Officer — Bruce Dale Broussard
• Chief Financial Officer — Karen L. Parkhill
• President, Personal Systems — Ketan Patel
• Global Treasurer & Head of Investor Relations — Alok Juyal

Takeaways

• Revenue -- $8.21 billion, representing 9% growth year over year and 6% growth in constant currency.
• Personal Systems segment revenue -- Grew 13%, driven by higher commercial (up 14%) and consumer (up 10%) performance, with double-digit growth in AIPCs, advanced compute, and workforce solutions.
• Personal Systems operating margin -- 5.2%, above expectations, attributed to accelerated mitigation actions offsetting higher input costs.
• Print segment revenue -- Flat year over year; hardware volume declines were offset by favorable pricing and currency effects.
• All-In Plan subscribers -- Delivered double-digit revenue growth in consumer print subscriptions, including an increase in All-In Plan subscribers.
• Industrial graphics revenue -- Achieved eleven consecutive quarters of revenue growth.
• 3D printing revenue -- Fifth straight quarter of double-digit revenue growth.
• Gross margin -- 20.9%, higher year over year due to favorable pricing and mix, partly offset by commodity cost increases.
• Operating margin -- 7.5%, up 20 basis points year over year.
• Net earnings per share -- $0.86, up over 20% compared to last year, based on approximately 925 million diluted shares.
• Free cash flow -- Approximately $800 million, above expectations, and over $900 million in cash from operations.
• Shareholder returns -- Returned nearly $400 million through dividends and share repurchases during the quarter.
• AIPC shipment mix -- Increased from 35% in the previous quarter to 44% during the quarter; management expects AIPC shipments to reach 60%-70% next fiscal year and surpass 70% by fiscal 2028.
• Geographic performance -- APJ constant currency revenue grew 18%, EMEA grew 6%, and Americas was flat.
• Mitigation actions -- Management highlighted strategic supplier relationships, diversified sourcing, and real-time supply planning as effective against ongoing cost pressures.
• Personal Systems market trend -- Industry experts and management project PC unit TAM will contract at a high-teens rate in the second half of the calendar year.
• Supplies revenue -- Flat year over year in constant currency, driven by executed pricing and share gains, despite a lower installed base.
• Operating expense -- Remained flat as a percentage of revenue, with continued investment in growth initiatives balanced by cost discipline.
• Guidance: Full-year EPS -- Raised to a $2.90–$3.10 per share range; fiscal Q3 guidance $0.61–$0.71 per share.
• Guidance: Full-year free cash flow -- Expected to land between $2.8 billion–$3 billion.
• Memory and storage procurement -- Management stated, "We have secured the memory and storage we need for the fiscal year" and are utilizing long-term supplier agreements for ongoing needs.
• CEO search -- Board is "actively evaluating candidates" for a permanent CEO but provided no timeline for completion.

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Risks

• Parkhill stated, "we continue to expect input costs to rise in the back half." Operating margins in Personal Systems are expected "to be below our long term range for the balance of the year," with fiscal Q4 cited as a "low point."
• Management highlighted, "We are focused on disciplined execution, accelerating our mitigation actions, and continued investment in innovation and growth to drive long term value," specifically calling attention to inflationary pressures in memory, storage, oil-related commodities, and logistics.
• In Print, Parkhill said, "we expect our Q3 op margins to be near the lower end of our long term range," reflecting seasonal hardware placements, higher oil-related input costs, and increased transportation expenses.
• Management reiterated expectations for Supplies revenue to "decline low single digit in constant currency this fiscal year," with further low-to-mid single digit annual declines anticipated long term.

Summary

HP (HPQ +4.34%) reported 9% revenue growth and over 20% earnings-per-share growth, led by Personal Systems strength with share gains in premium PC categories and continued momentum in AIPCs. The company executed repricing, supply chain, and cost mitigation actions in response to inflationary input headwinds, securing memory and storage needs for the fiscal year and managing procurement risk into 2027. Geographic growth was pronounced in APJ, boosted by Windows 11 refresh cycles, while the Americas region was flat due to earlier refresh timing. Guidance for full-year EPS and free cash flow was raised, reflecting confidence in the company’s ability to absorb further cost pressures and sustain returns to shareholders.

• The AIPC mix increased sharply to 44% of shipments, and management forecasts that mix to exceed 70% by fiscal 2028.
• Double-digit growth in both commercial and consumer Personal Systems revenue was partially boosted by a 2%-3% demand pull-forward in commercial, per management’s estimate.
• Management identified ongoing realignment of Print and Personal Systems strategies, prioritizing premium categories, recurring revenue models, and targeted hardware placements.
• Voluntary early retirement initiatives were implemented, with associated expenses recognized in restructuring charges for the quarter.
• Cost-saving initiatives remain on pace to deliver $1 billion in gross annualized run-rate savings by the end of fiscal 2028.
• Subscription-based models, especially for printing (All-In Plan), continue to expand, with international rollout planned, reflecting a shift toward recurring revenue streams.

Industry glossary

• AIPC: Artificial intelligence-enabled personal computer, featuring hardware acceleration for AI workloads and advanced inferencing at the device edge.
• All-In Plan: HP’s consumer print subscription program bundling hardware, supplies, and services with recurring payments.
• Tank printer: Printer category utilizing refillable ink tanks for high-volume, lower-cost-per-page printing, primarily targeting cost-conscious segments.
• Workforce Experience Platform (WXP): HP’s enterprise device management and optimization software with AI-driven predictive and proactive tools.
• Operating income and expense (OI&E): Non-operating items included in reported net income, such as financing and other income/expenses.
• Pilot/subscription attach: Strategy to bundle recurring services or subscriptions along with core product sales to increase customer lifetime value.

Full Conference Call Transcript

Operator: Good day, everyone, and welcome to the Second Quarter 26 HP Inc. Earnings Conference Call. My name is Krista, and I will be your conference moderator for today's call. At this time, all participants will be in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by 0. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Alok Juyal, Global Treasurer and Head of Investor Relations. Please go ahead.

Alok Juyal: Good afternoon, everyone. And welcome to HP's Second Quarter 26 Earnings Conference Call. With me today are Bruce Dale Broussard, HP's interim chief executive officer and Karen L. Parkhill, HP's chief financial officer. Before handing the call over to Bruce, let me remind you that this call is a webcast, and a replay will be available on our website shortly after the call for approximately 1 year. We posted the earnings release and accompanying slide presentation on our investor relations web page at investor.hp.com. As always, elements of this presentation are forward looking and are based on our best view of the world and our business as we see them today.

For more detailed information, please see disclaimers in the earnings materials relating to forward looking statements that involve risks, uncertainties, and assumptions. For a discussion of some of these risks, uncertainties, and assumptions, please refer to HP's SEC reports including our most recent Form 10-K. HP assumes no obligation and does not intend to update any forward looking statements. We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in HP's SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year over year comparisons with the corresponding year ago period.

In addition, unless otherwise noted, references to HP channel inventory refer to tier 1 channel inventory and market share references are based on calendar quarter information. Unless otherwise specified, all financial measures discussed today are non-GAAP and EPS refers to non-GAAP diluted net earnings per share. Please refer to the tables in today's earnings release and the accompanying slide presentation on our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. With that, I will now turn the call over to Bruce.

Bruce Dale Broussard: Thank you, Alok, and thanks everyone for joining us today. I want to start by saying how much I appreciate the opportunity to lead during this important time for the company. Through the efforts of our team around the world, we continue to advance our future of work strategy and help our customers navigate 1 of the most significant technology shifts ever due to AI. I want to recognize and thank the entire HP team for the focus, discipline, and agility they demonstrate every day. As interim CEO, I have spent significant time with customers, partners, and employees.

What I have seen is an organization that is moving with speed, focus, and urgency to strengthen our market position and accelerate innovation that benefits our customers. This is translating into strong results in a complex operating environment. Our second quarter performance underscores both the resilience of the business today and the opportunities we see ahead. Today, I will share the innovations we are bringing to market across our portfolio, the results we delivered this quarter as well as how we are planning for the environment ahead. But first, let me address 1 topic I know is top of mind. The CEO search. As a reminder, the board established a search committee and engaged an external search firm.

We are looking for a leader with the following attributes. First, a proven track record of creating long term value for customers and shareholders. Second, the ability to operate effectively in complex and rapidly changing environment, like many companies are navigating today. Lastly, global and multi segment business experience. We are engaged in a comprehensive process to select the best leader for HP. While we are not in a position to provide a timeline, the board is actively evaluating candidates who align with HP's need. Turning to innovation. Let me share how we are bringing our strategy to life across the company. As work evolves, organizations face critical decisions.

About their IT infrastructure and employees are adapting to new ways of working. Especially in the age of AI. AI innovation is accelerating. Adoption growing, rapidly across enterprises. Customers are becoming more thoughtful about where AI workflows run, AI is transforming computing from passive devices to context aware intelligence systems. Companies like HP that own the trusted edge, the workflow context, and the orchestration layer between local and cloud intelligence will be positioned to thrive in this environment. Rising cloud costs associated with Gen AI, along with latency, privacy, and security considerations are driving demand for AI workloads at the edge.

As a result, customers are building AI at the edge using smaller, open source, and proprietary models with more capable hardware and secure software. HP is enabling the future of work by providing the essential tools and technology necessary for this transformation. Our devices and software stack support the shift with strong architectural capabilities for edge inferencing and new AI workloads. We are becoming the trusted intelligent edge provider connecting devices, workflows, context, and physical environment. We continue to believe the future of AI is hybrid with edge playing an increasingly important role over time. Building on this opportunity, we recently unveiled a wave of innovation at our 150+ software companies of all sizes.

Previously, we highlighted our collaboration with partners like Zoom and CrowdStrike. Today, I want to showcase other software partners GoodNotes, for example, is leveraging the NPU for local audio transcription and summarization. While AI producer is transforming our AIPCs into professional production studios. These are just a few examples of how we are enhancing productivity, output, and workflow experience for our customers. To bring data center capabilities directly to the desktop and order to support the most demanding AI and compute workloads, we introduced new z workstations and AI stations These purpose built devices enable customers to develop, run, inference,, and scale AI workloads. Providing greater control over token costs, latency, and enterprise data security.

In print, we launched a new laser jet series with AI enabled document workflows. Quantum resistance security, and up to 50% faster document handling making work easier and more secure. We are also extending innovation into areas like construction and design. Connecting physical and digital workflows to help teams stay aligned from the office to the job site. Also, this quarter, we introduced the HP Multi Jet Fusion 1.2 thousand. Bringing industrial 3D printing capabilities into a more compact accessible system designed to help customers move from prototyping to production closer to where work happens. We are also creating better together experiences across our portfolio with the introduction of HP IQ.

This is a groundbreaking intelligence layer that coordinates seamless integrated experiences across all our products. A key feature is HP Near Sense, a new spatial intelligence that helps devices easily discover and connect to each other. The goal is to make tasks like file sharing, joining meetings, and moving between environments feel more intuitive and effortless. As work becomes more connected yet distributed, IT teams need simpler ways to manage, secure, and optimize environments. that is why we have enhanced our workforce experience platform known as WXP, with AI driven tools for proactive management of personal endpoints and shared spaces. WXP actively manages over 5.2 million devices across 180 countries.

These innovations represent our commitment to creating more connected experiences across devices, software, services, and security. They reflect our 1 HP approach in action. Which we believe positions us well to create more value for our customers and partners. We are seeing strong customer interest in these new innovations, which underscores our approach and a growing customer demand for our solutions. Let me turn to our quarterly results. In February, I said our focus would be on prudent execution. Taking the right cost action, and continuing to advance our future of work strategy. I am pleased to report we delivered against those commitments in Q2. Revenue grew 9% year over year, marking the eighth consecutive quarter of top line growth.

Led by strong personal systems performance. While print results were in line with expectations, Importantly, the quarter reflected not just growth, but disciplined execution. We continue to grow in high value categories, and accelerate our mitigation strategy to manage commodity cost pressures which allowed us to deliver EPS above our guidance. Let me turn to segment performance. In personal systems, revenue grew 13% year-over-year with strong growth in both commercial and consumer. This includes continued momentum in AIPCs, which increased from more than 35% to 44% of our shipment mix in the quarter. As well as continued strength in advanced compute solutions and workforce solutions. In print, revenue was flat year over year in a competitive market as expected.

We remain focused on pricing discipline and placement of profitable units. And gain share in big tank printers in line with our strategy. Industrial Graphics delivered its eleventh straight quarter of revenue growth with momentum in hardware, supplies, services. Turning to the external environment, we continue to navigate a challenging supply and cost environment. While remaining focused on disciplined execution In Q2, as anticipated, memory and storage cost increased sequentially. We expect this trend to continue in the second half of 26 with cost increasing in Q3 and Q4. Our strong execution of the mitigation strategies we outlined in February has strengthened our ability to navigate future headwinds.

Let me walk through the strong progress we have made in our 4-pillar plan. First, through our strong supplier relationships, and long term agreements, we are confident we have the memory and storage that we need for this fiscal year. Second, we fully operationalized a planning model that tightly aligns supply, demand, and product configuration decisions. This gives us greater flexibility to respond in real time and better positions the right products in the right markets, to meet customer demand. Third, our strategic inventory helped us remain cost competitive and maintain supply continuity. We continue enrolling new suppliers taking strategic inventory positions, strengthening our operational muscle, through demand steering activities, and expanding our attached businesses.

Lastly, we remain disciplined on both pricing and cost. We executed a differentiated repricing strategy. Prioritizing strategic customers, distributors, and countries. We also executed across multiple cost levers including sourcing optimization, platform cost reduction, and company wide productivity actions to help offset ongoing pressures while continuing to invest in the business. Looking ahead, we expect the memory and storage environment to remain constrained. In addition, we also anticipate broader inflationary pressures beyond memory and storage. Including oil prices and their downstream effects. To help mitigate these headwinds, we will continue to leverage the operational capabilities and discipline we strengthened in Q2. We remain focused on driving long term growth by leveraging our strong portfolio.

Go to market reach, supplier relationships, and innovation pipeline. In closing, we are confident in our future of work strategy and the significant opportunity ahead as AI continues moving to the edge. We believe our continued focus on innovation and discipline execution positions us well to drive sustainable growth and long term shareholder value. With that, I will turn it over to Karen.

Karen L. Parkhill: Thank you, Bruce, and good afternoon, everyone. We are pleased with our second quarter results. And the progress we have made against our financial commitments for the year. We delivered solid top line growth, driven by continued strength in personal systems, and momentum in our key growth areas. And through disciplined execution and an emphasis on what we can control, we also delivered EPS above our guidance range. Our results reflect the progress we have made on executing to the playbook we laid out at the beginning of the year to mitigate higher input costs. We took deliberate actions to lower our memory cost by accelerating product reconfiguration, and qualifying lower cost components.

We optimize the use of lower cost inventory on hand, while shaping demand to higher margin units. And lastly, we took action to reprice for commodity increases. Together, these actions had a meaningful impact on our operating profit in the quarter. Enabling us to deliver results above expectations. Now let me walk you through more details on our second quarter performance. We delivered 9% revenue growth year over year, or 6% in constant currency. By geography, the continued Win 11 refresh cycle in Asia and Europe, helped to drive strong performance as expected. With constant currency revenue in APJ up 18%, EMEA up 6%, and Americas flat.

Gross margin was 20.9%, up year over year, driven by favorable pricing and contributions from key growth areas. Partly offset by higher commodity costs and increased mix from personal systems. Operating expenses as a percent of revenue remained flat year over year, with continued investment in innovation, product promotion, and people. Offset in part by disciplined cost management. All in, our operating margin was 7.5%, up 20 basis points year over year. Below operating profit, lower financing costs contributed to better than expected other income and expense in the quarter. And with a diluted share count of approximately 925 million shares, our net earnings per share was $0.86 up over 20% year-over-year. Now let's turn to segment performance.

We delivered 13% top-line growth in personal systems. Reflecting prioritization of higher value unit placements continued services expansion, and disciplined pricing. Partly offset by lower volumes. Consistent with our strategy, we gained share in the premium PC categories. We also drove strong performance in key growth areas. With double digit year over year revenue growth in AIPCs, advanced compute solutions, and workforce solutions. We also delivered double digit revenue growth year over year both consumer up 10%, and commercial up 14%. Driven by repricing actions to cover commodity headwinds and favorable mix. As expected, commercial showed above seasonal sequential performance. Which we attribute in part to some demand pull in ahead of rising commodity prices.

All in, we drove personal systems operating profit growth of 30% year-over-year. With operating margins at 5.2%. Above expectations and due to the accelerated mitigation actions we took to offset higher input costs. Print revenue was flat year over year as expected. With hardware volume declines offset by favorable pricing and currency. Momentum in key growth areas continued. With double digit revenue growth in consumer subscription, including an increase in subscribers to our All-In Plan. And industrial print delivered another solid quarter, with year over year revenue growth across all regions. We also drove double digit growth in 3D printing for the fifth straight quarter. By customer segment, consumer revenue declined 10% year-over-year due to lower traditional printer volume.

In what continues to be a competitive pricing environment. Aligned with our strategy, we delivered double digit unit growth in tank printers, gaining share both year over year and sequentially. Commercial revenue was flat year over year, with higher ASPs helping to offset lower volume. We saw continued improvement in the office market and drove share gains sequentially across all A4 office categories. Supplies was flat year over year in constant currency. With pricing and share gains offsetting headwinds from installed base and usage. We delivered an operating margin of 0.3%, down year over year as expected. With higher trade related costs and promotional investment, particularly in big tanks, partly offset by pricing.

Across HP, we continue to advance our AI enabled transformation. Including modernizing our software development and delivery capabilities. We are consolidating platforms simplifying applications, and using AI to boost developer productivity, speed innovation, and deliver better customer experiences faster. And we are also scaling similar initiatives across the company. Including in our supply chain, go to market, and customer support organizations. We remain on track to generate $1 billion in gross annualized run rate savings by the end of fiscal year 28. As part of our efforts, we announced a voluntary early retirement plan in the quarter. And the expenses associated with that plan are included in our Q2 restructuring charges.

Our cost saving efforts remain an important lever to help offset macro headwinds while continuing to fuel investment in key strategic and go to market initiatives. Now let me move to cash flow and capital allocation. We generated over $900 million in cash from operations, and roughly $800 million in free cash flow in the quarter. Above our expectations on the strength of Personal Systems performance. And we returned nearly $400 million to shareholders through dividends and share repurchase. And finished the quarter within our target leverage ratio. We remain committed to returning approximately 100% of our free cash flow to shareholders over time as long as our gross leverage remains under 2x and there are not better return opportunities.

Looking ahead to the second half of the year, we expect to continue to drive revenue growth. And as Bruce mentioned, we also expect rising input costs to put increasing pressure on our operating margins. Particularly in personal systems. So we are taking a prudent approach to our outlook. That said, we have a strong track record of navigating near term headwinds. And we will remain focused on building on our Q2 momentum. By segment, In Personal Systems, we remain aligned with industry experts projecting the PC unit TAM to decline at a rate in the high teens for the second half of the calendar year.

Against this market backdrop, we continue to expect revenue growth in our fiscal year, driven by pricing actions, share gains in premium categories, and increased attach of higher margin offerings. we expect below seasonal revenue performance. For Q3, given first half demand pull forward, ahead of commodity price increases. And as signaled, we expect input costs to continue to increase through the back half. Given that, along with a decreasing benefit, from the lower cost inventory on hand, we continue to expect personal Systems OP margin rate to be below our long term range for the remainder of the year.

In print, we are aligned with industry experts anticipating a low single digit decline in the hardware market in the second half of the calendar year. We are executing our plans to gain additional share in both tank printers through portfolio extensions and targeted promotions. And in office as we fully roll out our latest AI enabled laser portfolio. We also expect sustained momentum in key growth areas. By expanding subscribers to our All-In Plan and driving growth in industrial. And while we continue to project supplies revenue will be down low single digit for the year in constant currency, We expect to drive both pricing and share gains.

For Q3, we expect print revenue generally in line with normal seasonality. And we expect operating margins near the lower end of our long term range. Reflecting typical seasonality incremental hardware unit placement, and near term input cost pressures. Which we are actively working to mitigate. That said, for the full year, we expect operating margins solidly in the range. Beyond the segments, we continue to expect OI and E to be $500 million for the year. And corporate other expense to be slightly under $1 billion. In summary, with 2 solid quarters behind us, we are strengthening our outlook for the fiscal year.

As you recall, last quarter, we signaled that earnings per share could be closer to the lower end of our guidance range. However, with the meaningful progress we have made against our mitigation playbook, we are now more confident in our ability to deliver higher EPS this fiscal year. As such, we now expect diluted net earnings per share to be in the range of $2.90 to $3.10.

For Q3, we expect diluted net earnings per share to be in the range of $0.61 to $0.71 Lastly, given our expectations for improved earnings performance, we expect our annual free cash flow to be solidly in the range of $2.8 billion to $3 billion In closing, we are pleased with our first half performance and progress we are making against our strategic and financial priorities. While we expect the external environment to remain dynamic in the back half of the year, We are focused on disciplined execution, accelerating our mitigation actions, and continued investment in innovation and growth to drive long term value.

As we turn to Q and A, given the current dynamics in our PC business, we have invited Ketan Patel, who leads personal systems, to join us similar to last quarter. So with that, I would like to hand it back to the operator and open the call for your questions.

Operator: Thank you. And we will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. Follow-up. And our first questioner today will be Samik Chatterjee with JPMorgan. Please go ahead.

Analyst (Samik Chatterjee): Hi. Thanks for taking my question. Maybe for the first 1, pretty strong margin performance in the PS segment. I know you are talking about that moderating as you go into the back half with memory costs continuing to go up. Maybe if you can talk about the offsets in the back half. You have talked about cost decreases or moderation of cost that you worked on as well as price increases as you look to offset some of the memory cost increase in the back half. Do you have more room to go on the cost reduction? Or is the back half more dictated by price increases that you potentially need to take? I have a follow-up as well.

Thank you.

Karen L. Parkhill: Yeah. Thanks for the question, Samik. You know, we talked about the fact that we continue to expect input costs to rise in the back half. And we and we also have the reducing benefit of lower cost inventory from our strategic inventory positions that we had this current quarter, this past quarter. So we do expect our operating margins to be below our long term range for the balance of the year. But that said, we are actively executing our mitigation actions. And if those actions prove more effective or the environment improves, there could be some upside. I would note, though, that based on what we are seeing today, we would expect Q4 to be a low point.

Followed by sequential improvement into next fiscal year. And we are, of course, continuing to drive cost reduction That will continue to benefit us in the back half and into FY 2027.

Analyst (Samik Chatterjee): Got it. Got it. Great. And maybe on Print, you mentioned the increasing input cost on that front as well, I think resins. Is the playbook there in terms of margin resilience similar to what you have executed in PS, or are you thinking about it in terms of how to pass some of those costs, increases in costs, to customers? Thank you.

Karen L. Parkhill: Yeah. Our playbook is very similar to what we executed in Q2. And we are going to continue to drive that in the back half of the year and beyond. Yeah.

Ketan Patel: And just to add, as to remind on the personal systems, the mitigation strategy were around leveraging our strong supply chain scale our ability to have right level of silicon diversity and strong supplier relationships And we demonstrated that in Q2, The other 1 is about driving cost actions across other commodity baskets as well as the overall design or cost initiative. And lastly is our demand shaping to optimize platforms and configs.

Operator: Your next question is going to come from the line of Amit Daryanani with Evercore. Please go ahead.

Analyst (Amit Daryanani): Good afternoon, everyone. Thanks for taking my question. I guess maybe the first 1 to start with, could you just help us frame or, you know, help us think about the size or the extent of which the full-year commercial strength that we saw on the personal systems side benefit from pull forward dynamics versus what you think is a more durable underlying demand given the fact you do have a Windows refresh and AI PC transition. Love to just understand the commercial PC side, how much of the strength you saw was pull forward versus underlying trends.

Karen L. Parkhill: Yeah. Thanks for the question, Amit. You know, we were pleased with the double digit growth we delivered in both consumer and commercial PS, and that was supported by disciplined pricing along with a richer mix in continued services. Expansion. There was some pull forward in commercial PS, as we mentioned, and we estimate that added roughly 2% to 3% of revenue. I hope that helps.

Analyst (Amit Daryanani): Yep. that is super helpful. And then as a follow-up. Right? If I think about the back half guide, the EPS run rate, I think, is around 65 to 70¢ a quarter. Is that the right baseline for us to think about as we think about fiscal 27? Such that we actually imply EPS in the $2.70 to $2.80 range for fiscal 2027. Or are there vectors of things that you can execute on to ensure that there is EPS growth in fiscal 27 versus the 2026 guide? And it is getting a little bit ahead, but would appreciate any insights on that.

Karen L. Parkhill: Yeah. Thanks, Amit. You know, we are still in our planning process. it is too early to give guidance for next fiscal year. But I would note that with this increasing cost of memory in Q3 and Q4, we do expect our Q4 PS margins to reach a trough or a low point. In Q4, and we do expect sequential improvement in those margins as we move ahead from there.

Operator: Your next question comes from the line of Erik Woodring with Morgan Stanley. Please go ahead.

Analyst (Erik Woodring): Hey, guys. Thank you so much for taking my questions. Can you just maybe just building on Amit's question, first question there, can you maybe just build a bit on how you are thinking about demand elasticity in the second half of the year? And then into 2027? Just kind of given the higher pricing environment and then kind of the evolution of the Windows 11 upgrades. And maybe my question, it really is you know, as you guys sit here today, how do you think about visibility into, you know, 2, 3, 4 quarters out as you just kind of alluded to some of those statements. with Amit.

I would just love to kind of understand how you kind of take that view today, how much visibility you actually have and how you see that impact demand elasticity? And then a quick follow-up, please. Thank you.

Karen L. Parkhill: Yeah. Thanks, Erik. Appreciate it. You know, we did say that we are aligned with industry experts out there that we expect unit TAM to be down high teens in the second half. And that is really given the fact that we see this rising price environment along with for us, the slight pull forward that we had in Q2 So we do expect unit demand to be down but that to be offset in revenue with what exactly what we have been driving. Increased prices, increased mix to premium, higher attach businesses, etcetera. So, Ketan, I will let you add anything here.

Ketan Patel: Yeah. On top of it, we believe there is a intrinsic strength in the demand in both commercial and consumer businesses and driven by 2 factors. 1, still Windows 11, ~30% of the installed base still to be refreshed. that is 1 tailwind which we see as an opportunity in short run. But in both short run and long run, as a lot of customers are moving workloads to the edge, with rising cost of Gen AI, that is a great opportunity, we believe, which is structurally available to us for AI and edge.

Which will help us drive better mix and share gains, particularly in premium categories and that is where we will see commercial demand remain strong on account of these 2 factors.

Analyst (Erik Woodring): Okay. Super. Thank you for that, for that color. And then just a quick follow-up. At least in the quarter, I know you guys are in this multiyear cost savings program. OpEx was up 9% year-over-year in the quarter. Just can you provide a little bit more detail? What drove that How sustainable is that just as we look into the second half? Thanks so much.

Karen L. Parkhill: Yep. Thanks for the question. So our OpEx was flat as a percent of revenue year over year as we expected. We do continue to invest in innovation and product promotion, particularly in our big tank units. And also in our people. While we are still maintaining cost discipline. And just as we look ahead, we would continue to expect OpEx to be roughly flat as a percentage of revenue. We are obviously still driving cost savings, that are important levers to enable us to continue to invest in AI and innovation, and also help offset some of the macro headwinds. But we expect OpEx to be roughly flat as a percent of revenue ahead.

Operator: Your next question comes from the line of David Voigt with UBS. Please go ahead.

Analyst (Brian Luke): Hey, thanks for taking the question. This is Brian on for David. So regarding my first 1, it is on memory sources slash allocation. Can you just speak to the ability to access new or incremental sources to offset the pricing pressures you are seeing? And I have a quick follow-up. Thank you.

Ketan Patel: Thanks for the question. I will take this. We have secured the memory and storage we need for the fiscal year. Through strong supplier relationship and long term agreements. And on top of it, we have fully operationalized our supply and-front planning model that aligns demand, supply, and configuration decisions in real time. And our strategic inventory position helped us to remain cost competitive while we remain disciplined on pricing and cost. Executing a differentiated repricing and multiple cost actions across sourcing, platforms, and productivity. And the speed of recovery is different differs by customer segment, by geography, by channel type, but balancing this mix to maximize meeting the customer expectations and cost recovery will continue to remain our focus.

Analyst (Brian Luke): Got it. that is helpful. So my second 1 is going to be on print. Are you seeing any demand spill across from PCs into print hardware and supplies? Are you seeing, like, a correlation between higher PC pricing, with customers maybe spending less on other hardware related products? Thank you.

Karen L. Parkhill: Yeah. Thanks for the question. On print right now, we continue to see a competitive environment and mainly enterprises. Prioritizing PC right now ahead of print. But over time, we do expect that to improve. And in fact, we are seeing less decline in office over the last 3 quarters which is a is a good sign. And we continue to see print usage trends remain pretty strong.

Operator: Your next question comes from the line of Wamsi Mohan with Bank of America. Please go ahead.

Analyst (Wamsi Mohan): Yes. Thank you. Supplies revenue flat constant currency. it is a lot higher than your long term expectations. Would you say like, there was some impact also from a channel inventory step up or is this purely related to maybe the mix of higher hardware in the quarter or something like that. Can you just help us think through what drove that sort of much better supply trajectory and as you think through the course of the year, how that might play out? And I do have a follow-up.

Karen L. Parkhill: Yeah. Thanks for the question, Wamsi. I would start with our channel inventories remain in line and healthy to what we would expect. But our supplies revenue was flat year over year in constant currency, a little bit better than our expectations this year to decline low single digit in constant currency. And that was really driven by pricing. That we have implemented to help offset the trade related headwinds. As well as share gains. And all of that is helping to offset the headwinds from a from a lower installed base. That said, we are not changing our expectations for supplies revenue to decline low single digit in constant currency this fiscal year.

And then we do expect them to continue to decline low to mid single digits over the long term. But, of course, we are focused on managing this trend by continuing to drive market share, also deliver growth in subscriptions, and industrial and 3D, which are our key growth areas. And our focus on maintaining strong margins.

Analyst (Wamsi Mohan): Okay. Thanks, Karen. And on print margins, you called out different factors that are impacting the third quarter to be at the low end. Of the print margin range. Should we expect the usual bounce back in Q4 or will the commodity price increases, whether it be resin or other areas? Will that create sort of a different dynamic going into Q4? And in your guidance, are you expecting any tariff refunds? And if so, could you quantify those, please? Thank you.

Karen L. Parkhill: Yes. Thank you. So as we look at the back half of the year with our print margins, we did say that we expect our Q3 op margins to be near the lower end of our long term range. And that is reflecting not just typical seasonality, but also a focus that we have on placing incremental hardware units. And we do also see some pressure from increased oil related commodities and transportation costs. But that said, we do see improvement in Q4 in those margins, and as we said, we expect print margins to be solidly in the range for the full fiscal year.

And on tariffs, you know, we are monitoring the government refund process, which continues to evolve. But currently, the government is not processing refunds for complex multinational companies like us. So, of course, when we are able, we will apply for refunds, but at this stage, it does not apply to us.

Operator: You are next question comes from the line of Asiya Merchant with Citi. Please go ahead.

Analyst (Mike Cadiz): Hey, good afternoon. This is Mike Cadiz. for Asiya Merchant at Citi. So my 1 question is, are you able to give any color on the performance by geography and why it is perhaps, more disparate. It seems that the all the acceleration was mainly from APJ. And just wanted to know if there was any elasticity there and why or any other factors that we should consider. Thank you.

Karen L. Parkhill: Yeah. Thanks for the question, Mike. You know, we did see a good growth in both EMEA and APJ this quarter, and some of that was driven by the expected tailwinds from Win 11. And I would say at this point, we have roughly 30% of the installed base still on Windows 10, so we still have some more to go. But the growth that we saw in EMEA and APJ reflected that. And I would say, the Win 11 refresh that we have driven now in EMEA and APJ is now on par with North America. Excellent. Thank you. Geography?

Ketan Patel: Yeah. I will Just Add that covers it In Terms Of Europe and APJ growth mainly because of Windows 11. Americas went earlier in 2025, back half of 2025. So you see that difference between the geographies. But across the 3 geographies, you see structural demand coming on AI PCs and premium PCs largely because of the AI and the edge which I called out before. And that remains strong even for Q3 and Q4.

Operator: Your next question is going to come from the line of Ananda Baruah with Loop Capital. Please go ahead.

Analyst (Ananda Baruah): Yes. Thanks, guys, for taking the question. I really appreciate it. Hey, was wondering Karen, I know you mentioned memory is procured through fiscal 26. what is the useful way to think about how you are feeling about fiscal 27 since it begins not so long from now. And then I have a quick follow-up. Thanks.

Ketan Patel: Yes. The way you saw our approach in 2026 of securing memory and storage and even CPUs. Throughout the fiscal year through a strong supply relationship and long term agreements the same process we will continue to make sure is in place for 2027 and beyond. On top of it-- yes, sir. We need to qualify new suppliers as we see further opportunities as we already qualified a lot of suppliers this year. And also accelerating a process of qualifying those components with the right level of quality checks into our entire portfolio. So that effort, we will continue to drive in terms of securing supply for next year. And it sounds like you feel pretty good at this point.

With being able to procure what you need. Yeah. it is always a moving piece, but, yeah, we have been confident as you see in our 2026 situation, and that same playbook will apply moving forward.

Operator: Your next question comes from the line of Katherine Murphy with Goldman Sachs. Please go ahead.

Analyst (Katherine Murphy): I was wondering if you could help frame how big resin may be in the bill of materials for printing hardware. And if there is any consideration for supplies across ink and toner. And then just as a quick follow-up, is there any consideration for higher resin prices across the PC and peripheral category as well? Tuan you.

Karen L. Parkhill: Yep. Thanks for the question, Katherine. You know, we are seeing rising costs for resin based on the oil situation right now. But that said, it is not too significant for us, and it is built into our outlook. We are not going to quantify what it is as a percent of the bill of materials, but we believe it is manageable.

Operator: Your next question comes from the line of Krish Sankar with TD Cowen. Please go ahead.

Analyst (Steven Chin): Hi. Thanks for taking my questions. This is Steven calling on behalf of Krish. I had 2 as well. First 1 is actually on component supply as it pertains to processors. Just kind of curious, you know, just with the strength in the data center server CPUs, any potential ripple effects on the CPU supply for your for your procurement in the second half of the year, especially across the different SKUs that you guys are focusing on?

Ketan Patel: Thanks for the question. We have a required supply we need on CPUs. We have known about small cores specifically having constraints since the beginning of the year, and we have been working to secure the supply we need. And with our process of moving towards higher end mix, that supply mitigation is already part of our plans in terms of execution Q2 and beyond. We are also managing price increases as we typically do across our entire commodities basket, on CPU pricing too. And finally, our silicon diversity helps us to work across multiple CPU suppliers and is beneficial to us in being able to secure both supply and pricing.

Analyst (Steven Chin): Got it. And thank you so much for that. And as my quick follow-up, I was kind of curious if you could provide some more commentary or anecdotes, related to, agentic AI, for the client in edge compute space. I know that we are still in early days of agentic AI in the enterprise, but some of the comments earlier, was that specifically focused on companies or customers that have large, you know, software developer bases, or was it a common anecdote from customers that are kinda debating between purchasing hardware that can run, you know, call it the open source agents versus a subscription model to, you know, whether it is it is Copilot or other frontier models.

Thank you so much. Thank you.

Ketan Patel: there is a real shift happening towards the AI and the edge. With workloads moving for reasons stated by Bruce earlier. Fundamentally, benefits like latency, privacy, sovereign AI, and the cost associated. And with this shift, the PC is becoming strategically relevant and HP has the right capabilities and proof points to shape how AI shows up at the edge. And in order to make sure that we are capitalizing on this, we are innovating on AI execution platforms. Starting from how systems are designed around and for AI workloads, where you see AI pieces and workstations are capable for running AI models locally and we demonstrated this through some amazing product innovations earlier at Edge Imagine.

Including HP IQ, and our whole security solution, which is unique in predicting and protecting at biased level and instruction. So, yeah, this is a great opportunity, and our partnership with 51 plus software partners who are also working on different use cases like productivity, developer needs, creative needs. For building in bringing in local workloads is also helping.

Karen L. Parkhill: And, Steven, I would also add that our AIPC mix that we shipped this quarter increased pretty substantially from 35% last quarter to 44% this quarter, as Bruce noted. And we continue to expect AIPCs to be a greater part of our shipments going forward reaching 60% to 70% next fiscal year and then above 70% by FY 2028.

Bruce Dale Broussard: Maybe I will just add a few things. to what both Karen and Keaton talked about. Is we are seeing a use of Gen AI with our with our technology. We are we are seeing it both on the governmental side and on the enterprise side. And the applications are both in using cloud, but more importantly, really utilizing the edge computing and we are seeing over time, and we are hearing it from our customers that they are really moving from a centralized cloud intelligence where models were formed to being able to create real time intelligence closer to the employee, consumer, and the workflow.

Operator: Your next question comes from the line of Tim Long with Barclays. Please go ahead.

Analyst (Tim Long): Thank you. 2 for me if I could. I wanted to ask a little bit on the move towards subscriptions in both print and PC. Just curious if anything's changed in there. We have heard in others in the industry where inflation or component availability might push enterprises or consumers more towards those type of models. I am wondering if that is something you are seeing or expecting to start to see. Then second, I just did wanna dig in on the consumer side. I think you talked about a little bit about price elasticity in units versus ASPs.

I am just curious you know, if that dynamic would be different in your view in the consumer side of the PC and print businesses. As far as looking out into the second half of the year and next year? Thank you.

Karen L. Parkhill: Sure. I will start, Tim, and I will ask Ketan to add on. But on subscriptions, we are focused on driving more and more recurring revenue where we can across our businesses. We are seeing great traction particularly in print in our All-In Plan, which continues to ramp. And we expect to expand it outside of the U.S. next year. Really, that subscription provides a simple frictionless experience for customers. And an ability to attach additional services like paper that make these customers more profitable over the long term versus a regular traditional print customer. Ketan, I will let you add.

Ketan Patel: On top of it on PC, especially on the consumer side, we are working on things like Flex PC, which has simplified financing model. For customers to choose from, and that makes their procurement much more simpler. Than buying upfront.

Karen L. Parkhill: And on price elasticity and consumer, we will clearly see how this plays out. But we do anticipate you know, obviously, lower unit demand going forward given the price increases, and that includes consumer. Yeah.

Ketan Patel: And I think just to add on the price elasticity, even where the price increases are, we see demand going down on the low end of the units while you will see it strength in the mainstream and premium price bands. As we see price increases happening because the overall relative percentage on the mainstream and premium is lower than what you see on the low end side of the pricing.

Operator: Your question comes from the line of Mark Newman with Bernstein. Please go ahead.

Analyst (Mark Newman): Yes. Hi. Thanks for taking my question. You mentioned earlier that supply was locked in. I think I heard correctly. For memory and ACD for the rest of the year. I think I heard that. Have you also locked in prices too? I am just curious if you could talk more about how your long term agreements work, and I have a follow-on. Thanks.

Karen L. Parkhill: Yes. We are confident in our supply position for the rest of the year. And as Ketan already noted, are working on our supply for next fiscal year, but feeling very confident and comfortable there. In terms of prices, we lock in prices a little bit ahead. We do not lock them in for the very long term because we want to make sure that as prices stabilize and go down, we have an ability to benefit from that. Anything you would add, Ketan?

Analyst (Mark Newman): Got it. Thank you.

Operator: That concludes our question-and-answer session.

Bruce Dale Broussard: I will now turn it back over to Bruce Dale Broussard for closing comments. Thank you all for joining us today. I am proud of how HP executed this past quarter. In a complex market and delivered with resilience and discipline while continuing to innovate and position the company for significant opportunity ahead as AI moves to the edge. And, of course, thank you to our employees around the world for their hard work and commitment. And to our investors for the continued confidence you place in us. I look forward to keeping you updated on our progress. Have a good afternoon.

Operator: Thank you. Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.