HP Inc. (NYSE:HPQ) stock fell in premarket trading Thursday after the company reported second-quarter results that topped Wall Street expectations but narrowed its full-year adjusted profit outlook.

HP Beats Earnings Estimates, But Stock Slips On Lowered Profit Outlook

The PC and printing company reported adjusted earnings of 86 cents per share, ahead of analyst estimates of 71 cents, according to Benzinga Pro data. Revenue increased 9% year over year to $14.41 billion, exceeding expectations of $14.04 billion and marking HP's eighth consecutive quarter of revenue growth.

AI PC Growth Drives Personal Systems

Gross margin expanded to 20.9%, supported by pricing actions and growth in higher-margin businesses, although higher commodity and component costs partially offset gains. Operating margin rose 20 basis points from a year earlier to 7.5%.

Revenue in HP's Personal Systems segment climbed 13%, driven by strong commercial and consumer demand, rising adoption of AI PCs and continued growth in advanced compute and workforce solutions.

AI PCs accounted for 44% of shipments during the quarter, up from more than 35% previously. HP expects AI PCs to represent between 60% and 70% of shipments next fiscal year.

Print revenue was flat year over year as pricing gains and favorable currency effects offset weaker hardware demand. Industrial graphics delivered its 11th consecutive quarter of growth, while 3D printing posted double-digit growth for the fifth straight quarter.

HP said it continues expanding its AI ecosystem through partnerships with more than 150 software companies. The company recently introduced new AI PCs, workstations, printers and industrial 3D printing systems at its HP Imagine event.

HP generated more than $900 million in operating cash flow and about $800 million in free cash flow during the quarter. The company returned nearly $400 million to shareholders through dividends and share repurchases.

HP Outlook Narrows Amid Cost Pressures

For the third quarter, HP expects adjusted earnings of 61 cents to 71 cents per share, compared with analyst estimates of 64 cents. The company also narrowed its fiscal 2026 adjusted earnings outlook to $2.90 to $3.10 per share, versus its prior forecast of $2.90 to $3.20 per share. Analysts currently expect fiscal 2026 earnings of $2.89 per share.

Management said memory and storage costs increased sequentially during the quarter and warned inflationary pressures are expected to continue through the second half of fiscal 2026, alongside higher energy-related input costs.

To offset rising expenses, HP said it is pursuing product redesigns, lower-cost component sourcing, targeted price increases, sourcing optimization and broader productivity initiatives.

The company also said it expects PC unit TAM to decline at a high-teens rate during the second half of the year, though it still anticipates revenue growth supported by pricing, premium product mix and higher-margin offerings.

HP remains on track to achieve about $1 billion in annualized cost savings by fiscal 2028 through AI-driven transformation efforts and operational efficiencies.

HPQ Price Action: HP shares were down 1.97% at $24.98 during premarket trading on Thursday, according to Benzinga Pro data.

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