The maker of expensive printer ink, which is pricier than blood, had a decent quarter, then spooked the cocaine nose jobs of Wall Street with a gloomier tone on the year ahead.
The outfit posted fiscal first-quarter earnings before certain costs, such as stock compensation, of 81 cents a share on sales of $14.44 billion, up seven per cent year on year. Wall Street wanted 77 cents on $13.94 billion, so it should have been happy.
Net income still slipped to $545 million from $565 million a year earlier, because revenue growth does not always pay the bills.
Looking ahead, HP repeated full-year earnings guidance of between $2.90 and $3.20 a share, but HP’s chief financial officer, Karen Parkhill, said: “The company now expects its results to be closer to the low end of that range than before.”
She blamed rising memory chips, which now cost more than an arm and a leg. HP shares fell more than six per cent in late trading.
Through the close, the stock is down 18 per cent year to date and 48 per cent over the last 12 months.
HP and other hardware makers are getting squeezed as memory goes scarce, with AI data centres hoovering up supply. HP said it expects memory prices in the current fiscal quarter to be roughly double those in the previous quarter.
To blunt that hit, HP says it will raise PC prices, hunt for cheaper suppliers and trim memory configurations on some models.
Parkhill told analysts: “We are well-practised at managing through headwinds.”
For the current quarter, HP guided to earnings of 70 to 76 cents a share, with the midpoint a hair below the Street’s 74 cents. That kind of near-miss rarely gets you a round of applause.
Constellation Research analyst Holger Mueller said HP had a strong quarter, except for memory inflation, which dragged earnings below last year’s.
“Demand seems to be strong, so HP has to keep executing while mitigating external factors,” he said.
HP’s personal systems revenue rose 11 per cent to $10.3 billion, beating the $9.8 billion consensus. Printing revenue was $4.2 billion, down two per cent, but ahead of the $4.1 billion estimate.
Parkhill said profit fell despite higher revenue due to memory prices and tariffs, as well as the cost of shifting manufacturing away from the worst-hit countries. Those moves are meant to save money after they have finished costing it.
Shareholders have a leadership mess to price in after chief executive Enrique Lores stepped down on 3 February to become PayPal’s CEO. He was replaced by interim CEO Bruce Broussard, a board member since 2021.
Broussard told the conference call: “We will consider a broad range of candidates, with a preference for proven executives who have successfully operated large multi-segment businesses in a complex and dynamic environment.”
HP postponed its annual investor day, previously set for April, without giving a new date.
In November, HP said it plans to cut up to 10 per cent of its workforce as it pushes more AI tools into product development, software work and customer support, because nothing says innovation like fewer staff.
