HP Inc Q1 EPS Tops Estimates as Memory Costs Double, Margins Squeeze
HP Inc. reported Q1 adjusted EPS of $0.81, beating consensus by $0.04, and sales rose 6.9% to $14.4 billion, topping forecasts by $0.5 billion. Management warned that memory component costs have doubled beyond initial 40%-50% guidance, pressuring margins and risking a downward revision of the full-year outlook.
1. Q1 Earnings Beat Estimates
HP posted adjusted EPS of $0.81, compared with the $0.77 consensus estimate, while revenue climbed 6.9% year over year to $14.4 billion, exceeding the $13.9 billion forecast. Strength in hardware shipments and service contracts underpinned the top-line beat.
2. Memory Cost Surge
Component expenses, driven by a doubling of memory pricing beyond the 40%-50% increase built into guidance, have eroded product margins and prompted management to highlight potential margin pressure in upcoming quarters.
3. Analyst Reactions
Bank of America Securities maintained an Underperform rating on HP, cutting its price target from $18 to $16 and citing slower PC demand, elevated memory costs, and uncertainty around the leadership transition as key concerns.
4. Mitigation Strategies
HP plans to offset margin headwinds through pricing adjustments, alternative component sourcing, improved supply-chain coordination, and tighter inventory management, while the print segment is expected to benefit from earlier price hikes and a more favorable product mix.