By Jaspreet Singh
Aug 26 (Reuters) – HP said on Wednesday its PC unit shipments and margins declined in the third quarter as price increases to offset rising memory chip costs proved to be insufficient, sending its shares down 9% in extended trading.
That overshadowed strong revenue growth of 12.5%, as HP said that rising commodity prices and waning benefits from lower-cost inventory are expected to further pressure margins for Personal Systems in the fourth quarter. A recovery is expected only in fiscal 2027.
“Given the impact of commodity-driven price increases, we expect below seasonal revenue performance in the fourth quarter,” CFO Karen Parkhill said on a post-earnings call.
“We do expect year-over-year revenue growth in the quarter, driven by pricing actions, share gains in premium categories, attach of higher margin offerings, and increased penetration of AI PCs as more AI workloads move to edge devices.”
HP, like peers Dell Technologies, Apple and China’s Lenovo Group, is grappling with a global memory chip squeeze, fueled by massive AI data center buildouts that are sucking up capacity.
While PC unit revenue rose 18% in the third quarter, unit shipments dropped 16%, as it focused on selling more expensive, higher-margin products, including AI PCs. Printing revenue fell 2% to $3.9 billion in the three months ended July 31.
Operating margin for the PC segment shrank to 4.6% from the prior quarter’s 5.2%, as rising commodity and memory costs outpaced price increases.
HP expects fourth-quarter adjusted earnings per share between 69 cents and 79 cents, above analysts’ average estimate of 67 cents, according to data compiled by LSEG. The forecast includes an 8 cents boost from estimated tariff refunds.
Adjusted profit of 83 cents per share for the quarter included an 11 cents per share boost from tariff refunds. Analysts had expected adjusted EPS of 69 cents per share.
U.S. President Donald Trump’s administration has refunded about $100 billion from tariffs it collected before the U.S. Supreme Court struck down those duties.
Third-quarter revenue of $15.7 billion exceeded estimates of $14.38 billion, helped by strong demand for AI-optimized PCs.
HP also raised its annual forecast for adjusted earnings per share to a range of $3.19 to $3.29, including a 19 cents favorable impact from estimated tariff refunds for the entire year. The laptop maker had earlier forecast annual adjusted EPS to be $2.90 to $3.10.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Leroy Leo)
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