As price hikes to offset rising memory chip prices proved insufficient, HP (HPQ.N) reported on Wednesday that its PC unit shipments and margins decreased in the third quarter, sending its shares down 9% in extended trade.
This obscured the company’s impressive 12.5% revenue growth. According to HP, growing material prices and diminishing advantages from lower-cost inventory are anticipated to further strain Personal Systems’ margins in the fourth quarter. Only in fiscal 2027 is a recovery anticipated. We anticipate below-seasonal sales performance in the fourth quarter due to the impact of commodity-driven pricing hikes,” CFO Karen Parkhill stated 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.”
Similar to its competitors Dell Technologies (DELL.N), Apple (AAPL.O), and China’s Lenovo Group (0992.HK), HP is facing a global memory chip squeeze caused by significant AI data center buildouts that are depleting capacity.
As it concentrated on selling more expensive, higher-margin products, such as AI PCs, PC unit revenue increased by 18% in the third quarter, but unit shipments decreased by 16%. In the three months ending July 31, printing revenue dropped by 2% to $3.9 billion.
Due to increased commodity and memory costs outpacing price increases, the PC segment’s operating margin decreased to 4.6% from 5.2% in the previous quarter.
According to data gathered by LSEG, HP anticipates adjusted earnings per share for the fourth quarter to be between 69 and 79 cents, above the average forecast of 67 cents by analysts. An 8-cent increase from anticipated tariff refunds is included in the forecast.
