rewrite this title HP Q2 Earnings: AI PCs Surge as Memory Costs Cloud the Horizon – UC Today

HP posted revenue of $14.4 billion in its fiscal second quarter of 2026 – up 9% year-over-year – delivering non-GAAP EPS of $0.86, well ahead of analyst estimates of $0.71.

The results, driven by surging demand for AI-optimised PCs and a continuing Windows 11 refresh cycle, marked the company’s eighth consecutive quarter of top-line growth. Shares jumped as much as 15% in after-hours trading.

The results come against a backdrop of rising commodity costs, a leadership transition, and an accelerating shift toward AI-optimised computing at the edge.

AI PCs Take Centre Stage

The standout number from the call: AI PCs now make up 44 percent of HP’s total PC shipments, up from 35 percent last quarter. HP is projecting that figure will reach 60–70 percent in fiscal 2027, climbing above 70 percent by fiscal 2028.

Interim CEO Bruce Broussard was emphatic about what’s driving the shift. “Customers are becoming more thoughtful about where AI workloads run,” he told analysts, pointing to rising cloud costs, latency concerns, and data privacy pressures as forces pushing enterprises toward edge computing.

“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.”

HP’s pitch is that the PC is becoming a genuine AI execution platform – not just a thin client for cloud services.

Its new Z Workstations and AI Stations are designed to run inference locally, and HP showcased an expanding ecosystem of 150+ software partners building productivity, developer, and creative tools around that capability at its HP Imagine event this quarter.

The Windows 11 refresh cycle is adding further fuel. HP noted that roughly 30% of the installed base is still running Windows 10, with significant upgrade waves still to come in EMEA and APJ – markets that delivered constant currency revenue growth of 6 percent and 18 percent respectively this quarter.

Personal Systems President Ketan Patel noted: “There is intrinsic strength in both commercial and consumer, driven by Windows 11 and AI at the edge – and that remains strong even for Q3 and Q4.”

Personal Systems revenue grew 13 percent year-over-year overall, with operating profit up 30 percent – a standout performance that CFO Karen Parkhill attributed to disciplined pricing, a richer product mix, and accelerated mitigation actions on commodity costs.

The Memory Crunch

Not everything was straightforward. HP was candid about a worsening memory and storage cost environment that it expects to intensify through the second half of the year.

Input costs rose in Q2, will rise further in Q3, and are expected to peak in Q4 – with Personal Systems operating margins forecast to hit a trough before sequential improvement heading into fiscal 2027.

Parkhill outlined a four-pillar mitigation strategy: securing supply through long-term agreements, a tighter supply-demand planning model, strategic inventory positions, and differentiated repricing. “Based on what we’re seeing today, we would expect Q4 to be a low point, followed by sequential improvement into next fiscal year,” she said.

HP also flagged broader inflationary pressures beyond memory – including oil prices feeding through into resin and transportation costs – though the company described these as manageable and already factored into its outlook.

Print Holds Its Ground

Print revenue came in flat year-over-year at $4.2 billion, which HP characterised as in line with expectations in a competitive and structurally challenged market.

There were genuine bright spots: double-digit growth in consumer subscriptions through the HP All-In Plan, a fifth consecutive quarter of double-digit 3D printing revenue growth, and an 11th straight quarter of Industrial Graphics revenue growth.

The company is leaning into Tank printers to drive consumer share gains, and reported continued improvement in the office market over the past three quarters – a tentative sign that enterprise print demand may be stabilising.

Outlook and Leadership

HP raised its full-year non-GAAP EPS guidance to $2.90–$3.10 and guided for free cash flow of $2.8–$3.0 billion. For Q3, the company expects non-GAAP EPS of $0.61–$0.71.

The one unresolved question hanging over the business is the CEO search. Broussard, who stepped in as interim following the departure of Enrique Lores, confirmed that an external search firm is engaged and candidates are being evaluated – but declined to offer a timeline.

He described the ideal successor as someone with “a proven track record of creating long-term value” and the ability to operate in “a complex and rapidly changing environment.”

For now, HP’s numbers speak for themselves. The AI PC narrative is gaining real momentum, the mitigation playbook is working – and the memory squeeze will test both in the months ahead.