As cloud giants soak up memory capacity to power their data centers, hardware makers like HP are feeling the pinch. While the American computer and printer maker posted quarterly results that beat expectations on Tuesday, it signaled that its full-year profits would land at the low end of its guidance, around $2.90 per share versus the $2.90 to $3.20 range previously announced.
Even more worrying, HP expects PC shipments to decline by double digits over the entire fiscal 2026, in line with industry trends.
Memory, the industry’s Achilles’ heel
At the heart of these headwinds lies a memory-chip shortage. In November last year, HP estimated that memory and storage components accounted for about 15% to 18% of the cost to manufacture its computers. That ratio is expected to climb to 35% for the full fiscal year. Chief Financial Officer Karen Parkhill said during an analysts’ conference call that memory prices had nearly doubled in just one quarter and that further increases are anticipated. The shortage is expected to persist beyond fiscal 2026.
In response to this situation, HP said it has undertaken several corrective measures: diversifying suppliers, adjusting certain products to reduce their memory usage, and raising selling prices. “We have a solid track record in managing commodity cycles,” said Bruce Broussard, the interim chief executive, trying to reassure investors.
Tariffs and the leadership transition
Component volatility isn’t the only challenge. HP must also contend with the Trump administration’s trade policy. The group has largely relocated production outside of China for products intended for the North American market, a move that anticipated tariffs and has paid off in the short term. HP says it does not expect the new U.S. tariff measures to weigh on its operations immediately, while noting that it “continues to engage in dialogue with the administration on these matters.”
The situation is further complicated by an unexpected leadership change. In early March, PayPal wooed away Enrique Lores, HP’s chief executive, to take the helm there. As a result, Bruce Broussard, a board member, is serving as interim CEO while the group searches for a permanent successor.
Positive signals not to be overlooked
The picture isn’t all dark. HP reports sustained demand in Europe and Asia, driven by the refresh cycle tied to Windows 11. The premium segment, for both business and consumer markets, is lifting the average selling prices. And PCs equipped with artificial intelligence features accounted for more than 35% of shipments in the first quarter, up from 30% in the prior quarter, an accelerating adoption that brightens the company’s outlook.
HP has also launched a multi-year cost-cutting program aimed at achieving $1 billion in annual savings by 2028, even as the plan involves upfront restructuring charges.
A solid quarter, a difficult year
On a strictly accounting basis, the first fiscal quarter (ended January 31) was reasonably encouraging. Revenue rose 6.9% to $14.44 billion. The Personal Systems division, which includes consumer and enterprise PCs, posted an 11% increase in revenue to $10.25 billion, driven in particular by a 16% rise in consumer sales. Printing revenue, however, fell by 2% to $4.19 billion.
