HP
The world's second-biggest PC maker and its biggest printer maker, which earns most of its profit from the ink and toner people keep buying for printers they already own.
The scores
Growth2/4 →
Revenue fell from $63.5B in 2021 to $53.6B in 2024; this year's rise is memory priced through while PC units fall.
Business quality2/4 ↓
Ink and toner hold an installed base, but PCs are bought on price and HP lost units fastest; ink tanks erode supplies.
Financial position3/4 →
About $5.0B of net debt, spread maturities and an undrawn $5.0B line; suppliers fund the working capital.
Execution record3/4 →
Beat estimates each quarter of fiscal 2026 and raised guidance, but the chief executive left abruptly and PC margins fell.
Per share capture4/4 →
Shares fell from 1,220M to about 902M since 2021 on buybacks; stock pay is outrun and no deal is pending.
Potential2/4 →
Upside needs memory prices to ease and businesses to buy AI PCs, both outside HP's control; nothing is contracted.
Risk profile3/4 →
Memory from a few chip makers, Asian assembly exposed to tariffs, and an interim chief executive; customers are spread.
Valuation3/4 ↓
About 10.4 times guided earnings and a 10% free cash yield: fair if 2027 profit holds, as consensus expects.
Evidence quality3/4 →
Statements, debt and pay are filed; PC share rests on secondhand IDC and Gartner copies, and the price split on management.
The Verdict
We rate HP Neutral. The business is mixed: printing is a slowly shrinking but profitable habit, while PCs are a low-margin business bought on price, where HP lost more units than any big rival as memory costs pushed prices up. The price is fair, about 10 times this year's earnings, but only if profit holds next year. It hinges on whether HP can keep raising PC prices without losing more buyers, and nothing in the market's price pays for a recovery or charges for a worse year.
The long caseIf memory prices ease in 2027 and businesses replace ageing PCs with AI models, HP's PC margins recover while ink and toner keep paying the dividend.
The evidence under this - 6 claims
A richer mix of commercial, premium and AI PCs also lifts the average price (C11), so not all of the rise is memory passed on.
HP's own fiscal quarter to July shows units down 16% (C03); part of the later fall may be stock bought early, which IDC itself names.
Management says supplies shrink only by a low-to-mid single-digit percentage a year (C13).
Guided free cash flow of $3.0B to $3.2B is about a 10% yield on the $30.4B market value, and the dividend about 3.6% (C05, C21).
Fiscal 2025 carried tariff costs that the refunds partly return, so the two years are not struck on the same cost base (C25).
Management says memory costs rise more slowly in fiscal 2027 and October is the margin low (C07), and premium and AI PCs are gaining share (C11).
The company
HP makes laptops, desktops and workstations for offices and homes, and the printers, ink and toner to go with them. Outside factories in Asia build most of it, and resellers and shops sell most of it.
A company buys thousands of PCs at a time and judges them on price, security and how easily its IT staff can look after them. A household picks a laptop or a printer off the shelf, mostly on price. Once a printer is home, its owner keeps buying cartridges that fit it.
The evidence under this - 3 claims
A richer mix of commercial, premium and AI PCs also lifts the average price (C11), so not all of the rise is memory passed on.
Management says supplies shrink only by a low-to-mid single-digit percentage a year (C13).
How it makes money
Most of the revenue comes from PCs, which keep only about 5 cents of operating profit from each dollar. The printers keep about 18 cents, because the money is in the ink and toner sold for years after the printer itself. In fiscal 2025 those supplies brought in $10.9B, about two-thirds of printing's sales, and printing earned more profit than PCs on less than half the revenue.
The evidence under this - 3 claims
Part of the margin fall was US tariffs, which the board adjusted out of the year's bonus results (C29) and which the Supreme Court later struck down (C25).
Management says supplies shrink only by a low-to-mid single-digit percentage a year (C13).
Management says customers bought ahead of price rises in the first half, so part of the fall in units is timing (C07).
Where the money comes from, stream by stream
| Stream | Share of sales (FY 2025) | How it earns it |
|---|---|---|
| Commercial PCs | 49.6% | Notebooks, desktops, workstations and accessories for businesses and governments. |
| Consumer PCs | 20.1% | Laptops, desktops and gaming machines for households, sold mostly through retailers. |
| Supplies | 19.7% | Ink, toner and other consumables for the installed base of HP printers. |
| Commercial printing | 8.4% | Office laser and inkjet printers, managed print services and industrial presses. |
| Consumer printing | 2.1% | Home inkjet and ink-tank printers. |
Who runs it
HP has no permanent chief executive. Enrique Lores left in February 2026 for a job elsewhere, and Bruce Broussard, a director who used to run Humana, is filling in while the board searches; in August he gave no timeline. The finance chief and both business heads stayed.
Directors and officers own under 1% of the shares, and no insider bought any in the past year. Bonuses pay on sales, profit and cash, and most long-term pay rides on three years of earnings per share.
The evidence under this - 5 claims
The finance chief and both segment heads stayed in post (C28), so the operating team is unchanged.
Why it wins, and who could beat it
Why customers come back
The hold HP has on its customers is in printing. A printer only takes cartridges made for it, HP's cartridges carry chips its printers check, and people rarely switch printers just to change ink, so the money keeps coming in as long as the printers stay in use.
That hold is weakening slowly. Supplies fell 3.4% in fiscal 2025, and outside counts show printer sales falling about 7% a year, with refillable ink-tank printers taking share from cartridge models. Xerox names HP among the biggest office printing rivals.
The evidence under this - 4 claims
Management says supplies shrink only by a low-to-mid single-digit percentage a year (C13).
IDC counts the printer market down 7.0% in the June quarter, faster than a mid-single digit (C14).
The threat
In PCs there is no such hold. Lenovo ships more PCs than anyone, Dell sells the same business machines at a similar thin margin, Apple's Macs gained share as the market fell, and Acer and ASUS undercut on price. When memory pushed prices up in 2026, HP's shipments fell about 31%, the most of the five biggest makers.
The evidence under this - 3 claims
HP's own fiscal quarter to July shows units down 16% (C03); part of the later fall may be stock bought early, which IDC itself names.
Gartner says business demand held up best for workstations and AI PCs, where HP says it is gaining share (C11).
The rivals: DELL, AAPL, XRX, MSFT, LOGI, and 4 more that are private, in-house or listed abroad.
Who else does this, rival by rival
| Ticker | Rival | Where it competes | How far along | Priced against it |
|---|---|---|---|---|
| LenovoPriced against it: Listed abroad | Personal Systems | On sale | Listed abroad | |
| DELL | DellPriced against it: One segment only | Personal Systems | On sale | One segment only |
| AAPL | Apple MacPriced against it: One segment only | Personal Systems | On sale | One segment only |
| Acer and ASUSPriced against it: Listed abroad | Personal Systems | On sale | Listed abroad | |
| Epson, Canon and Brother ink-tank and laser printersPriced against it: Listed abroad | Printing | On sale | Listed abroad | |
| XRX | Xerox (with Lexmark)Priced against it: One segment only | Printing | On sale | One segment only |
| Not listed | Non-original cartridge makersPriced against it: Not listed | Printing | On sale | Not listed |
| MSFT | MicrosoftPriced against it: One segment only | - | On sale | One segment only |
| LOGI | Logitech InternationalPriced against it: One segment only | - | On sale | One segment only |
How big it could get
How big this could get
HP already ships about one PC in six sold worldwide and more printers than anyone, so there is no new market to win. About 63 million PCs shipped worldwide in the September 2026 quarter, a fifth fewer than a year earlier, and about 17 million printers in the June quarter.
Growth has to come from selling dearer machines, not more of them, and nobody publishes what each maker earns per PC.
The evidence under this - 4 claims
HP's own fiscal quarter to July shows units down 16% (C03); part of the later fall may be stock bought early, which IDC itself names.
Gartner says business demand held up best for workstations and AI PCs, where HP says it is gaining share (C11).
Part of the margin fall was US tariffs, which the board adjusted out of the year's bonus results (C29) and which the Supreme Court later struck down (C25).
The results
The numbers
Sales grew 8.1% over the twelve months to Jul 2026, about the same pace as the 3.2% in the year to Oct 2025.
Operating margin is 5.4%, about where it was (6.4%) in the year to Oct 2023.
Running costs take 14¢ of each sales dollar, up from 13¢ in the year to Oct 2021.
Each dollar put into the business earns 32% a year after tax, down from 95% in the year to Oct 2021.
It turned 6.6% of sales into free cash, $3.88B over the last twelve months.
It owes $4.99B more than the cash it holds, about 1.1 years of the cash its operations bring in.
The share count fell 24% in 4.8 years, and pay in shares costs 0.8% of sales.
All the numbers
Filed figures from the company's 10-K and 10-Q, read 2026-10-23. Fiscal years end in October.
| Oct 2021 | Oct 2022 | Oct 2023 | Oct 2024 | Oct 2025 | 12 mo to Jul 2026 | |
|---|---|---|---|---|---|---|
| Size and growth | ||||||
| Sales | $63.5B | $62.9B | $53.7B | $53.6B | $55.3B | $59.2B |
| Sales growth | +12% | −0.9% | −15% | −0.3% | +3.2% | +8.1% |
| Profit | ||||||
| Gross margin | 21% | 19% | 21% | 22% | 21% | 20% |
| Operating margin | 8.4% | 7.2% | 6.4% | 7.1% | 5.7% | 5.4% |
| Net margin | 10% | 5.0% | 6.1% | 5.2% | 4.6% | 4.1% |
| What growth costs, per sales dollar | ||||||
| Research and development | 2.9% | 2.6% | 2.9% | 3.1% | 2.9% | 2.7% |
| Selling, general and admin | 9.0% | 8.4% | 10.0% | 11% | 11% | 10% |
| Pay in shares | 0.5% | 0.5% | 0.8% | 0.8% | 0.9% | 0.8% |
| Capital spending | 0.9% | 1.2% | 1.1% | 1.1% | 1.6% | 1.3% |
| Cash | ||||||
| Cash from operations | $6.41B | $4.46B | $3.57B | $3.75B | $3.70B | $4.67B |
| Free cash flow | $5.83B | $3.70B | $2.98B | $3.16B | $2.80B | $3.88B |
| Balance sheet | ||||||
| Cash and short-term investments | $4.30B | $3.15B | $3.11B | $3.24B | $3.69B | $4.17B |
| Debt | $7.49B | $11.0B | $9.48B | $9.67B | $9.67B | $9.16B |
| Net cash | −$3.19B | −$7.87B | −$6.38B | −$6.43B | −$5.98B | −$4.99B |
| Returns and shares | ||||||
| Return on capital | 95% | 48% | 42% | 39% | 34% | 32% |
| Shares (diluted) | 1.22B | 1.05B | 1.00B | 989M | 953M | 927M |
What growth costs
Growing has made HP less profitable, not more. The extra sales of the past year came from passing on dearer memory at little or no profit, so the share of each dollar kept after costs fell even as revenue rose. Research spending has stayed about flat for five years.
The evidence under this - 3 claims
The operating line carries restructuring charges of $539M in nine months (C23), which non-GAAP figures exclude.
Management says customers bought ahead of price rises in the first half, so part of the fall in units is timing (C07).
A richer mix of commercial, premium and AI PCs also lifts the average price (C11), so not all of the rise is memory passed on.
The last report (26 Aug)
Quarter ended July 2026, filed figures.
Q3 fiscal 2026, the quarter to July, looked strong on the surface: sales grew 12.5% to $15.7B, a record for the quarter, and HP raised its forecast for the year. The detail was weaker. PC sales grew 18% while the number of PCs sold fell 16%, so the growth was higher prices, and the profit kept on each PC dollar slipped. Printing shrank 2%.
Earnings included 11 cents a share of tariff refunds after the Supreme Court struck those tariffs down, and the forecast for the October quarter is well below a year earlier once refunds are taken out.
What it did to the thesisIt confirmed that HP can push memory costs through to buyers, but showed the price of doing so: fewer PCs sold and thinner PC margins. It left open the question the view hinges on, whether profit holds next year once refunds end.
The quarter in detail
Sales growth from the previous quarter, filed figures.
Earnings per share $0.83 against $0.66 expected; $0.71 as filed, the gap being what the company adds back.
The evidence under this - 5 claims
Management says customers bought ahead of price rises in the first half, so part of the fall in units is timing (C07).
A richer mix of commercial, premium and AI PCs also lifts the average price (C11), so not all of the rise is memory passed on.
The October-quarter guide is below the $0.93 of non-GAAP EPS earned a year earlier (C36).
HP beat analysts' estimates in each of the last three quarters (C36).
What management did with the money
HP hands most of its cash back. In fiscal 2025 it returned $1.9B through dividends and buybacks and raised the dividend, and it has bought back so many shares that there are about a quarter fewer than in 2021. This year it has also paid down $770M of debt.
Insiders in 2026Q3: 3 purchases and 9 sales, from their Form 4 filings.
The evidence under this - 3 claims
The price, and where we disagree
In short. Fair. The price pays for this year's profit holding through 2027, and nothing for a PC recovery or for losing more buyers.
The shares have risen about 60% in six months, almost all of it because buyers now pay more for each dollar of sales, even though outside counts in October showed HP's PC shipments down about 31%. The price fell for a day on that news and then recovered.
The test comes on 24 November 2026, when HP reports its October quarter and gives its first forecast for fiscal 2027, a year it already expects to bring fewer PCs.
The evidence under this - 5 claims
The shares are below the $36.23 high of 11 September and fell 6.9% the day IDC's count came out (C37).
HP's own fiscal quarter to July shows units down 16% (C03); part of the later fall may be stock bought early, which IDC itself names.
HP beat analysts' estimates in each of the last three quarters (C36).
IDC says PC prices will stay well above a year earlier (C09), and higher prices are what cut units in 2026.
How we read the multiple
A buyer is paying for this year's profit to carry into next year. Without the tariff refunds, this year's earnings are about flat on last year's, and analysts expect much the same again in 2027, while HP itself plans for fewer PCs and dearer memory.
- HP forecasts $3.19 to $3.29 of adjusted earnings per share this year.
- About 19 cents of that is one-off tariff refunds.
- At $33.76, the shares cost about 10.4 times the forecast's middle.
- Analysts expect about $3.19 in fiscal 2027, so the price assumes profit holds.
Against its own history. Buyers pay more than usual for each dollar of HP's profit, on profit that is not growing, so the recent rise is a better mood, not a better business.
The evidence under this - 5 claims
Guided free cash flow of $3.0B to $3.2B is about a 10% yield on the $30.4B market value, and the dividend about 3.6% (C05, C21).
The October-quarter guide is below the $0.93 of non-GAAP EPS earned a year earlier (C36).
Fiscal 2025 carried tariff costs that the refunds partly return, so the two years are not struck on the same cost base (C25).
Short interest is a modest 8.1% of the float (C35), so few are betting heavily against it.
Fiscal 2025's $2.9B of free cash flow (C21), with no such swing, is the steadier figure.
Priced against its rivals
None of the listed rivals above sells the same thing to the same buyers as a large part of what it does. A price comparison needs at least two, so the price is judged against its own history instead.
Private or foreign rivals that cannot be priced: Lenovo Group, Acer and ASUSTeK, Canon, Seiko Epson, Brother and Ricoh, Pantum, Huawei, Samsung Electronics and Toshiba.
Where we disagree with the market
HP can pass dearer memory on to buyers and keep its earnings flat into 2027, with a 10% cash yield to wait on.
Passing costs on cost HP the most buyers of any big maker; flat 2027 profit needs that to stop.
The market may be right that memory prices ease and businesses replace old PCs with AI machines in 2027, which would let margins recover. HP says the October quarter is the low point.
Against that, HP's own planning assumes fewer PCs again next year, and it lost more buyers than any big rival the last time it raised prices.
What analysts say, and the evidence
The evidence under this - 6 claims
Guided free cash flow of $3.0B to $3.2B is about a 10% yield on the $30.4B market value, and the dividend about 3.6% (C05, C21).
Short interest is a modest 8.1% of the float (C35), so few are betting heavily against it.
Fiscal 2025 carried tariff costs that the refunds partly return, so the two years are not struck on the same cost base (C25).
HP's own fiscal quarter to July shows units down 16% (C03); part of the later fall may be stock bought early, which IDC itself names.
Gartner says business demand held up best for workstations and AI PCs, where HP says it is gaining share (C11).
Management says memory costs rise more slowly in fiscal 2027 and October is the margin low (C07), and premium and AI PCs are gaining share (C11).
What could go wrong, and how we would know
The risks
- Losing more PC buyers. If memory keeps getting dearer, HP must raise prices again, and the last rise cost it a third of its shipments.
- Thin PC margins. PCs keep about 5 cents a dollar; a small squeeze from memory costs or price cuts wipes out much of the profit.
- Ink slowly drying up. Refillable ink tanks, copied cartridges and less office printing shrink the supplies that earn most of HP's profit.
- No permanent chief executive. A new leader could change the cost plan, the dividend or the buybacks.
- Suppliers fund the business. HP owes suppliers about five months of costs; paying them faster would take billions out of its cash.
The evidence under this - 7 claims
HP's own fiscal quarter to July shows units down 16% (C03); part of the later fall may be stock bought early, which IDC itself names.
Gartner says business demand held up best for workstations and AI PCs, where HP says it is gaining share (C11).
Management says memory costs rise more slowly in fiscal 2027 and October is the margin low (C07), and premium and AI PCs are gaining share (C11).
IDC and Gartner show HP's own units falling about 31% in the September quarter, half again the market's fall (C09, C10).
The finance chief and both segment heads stayed in post (C28), so the operating team is unchanged.
Stock bought ahead of memory price rises is part of the inventory, so some of this unwinds as it is sold (C07).
What we still do not know
- Who will be HP's permanent chief executive, and will they keep the cost plan and the cash returns?
- How much of the rise in PC prices is memory passed on, and how much is buyers choosing better machines?
- What lifted the shares almost 8% on 22 October 2026, when the company said nothing?
The evidence under this - 3 claims
The finance chief and both segment heads stayed in post (C28), so the operating team is unchanged.
A richer mix of commercial, premium and AI PCs also lifts the average price (C11), so not all of the rise is memory passed on.
What would change our view
- Neutral→AttractiveA cheaper price on the same profit
It needs:
- ○The shares fall to about 8 times this year's forecast earnings, from about 10.4.about $25.97 today, 23% below the last close
- Neutral→AttractiveFiscal 2027 holds up
It needs all of:
- ○HP's 2027 forecast calls for adjusted earnings of at least $3.05 a share and at least $3B of free cash.checked at the next results, due by 24 Nov
- ○The PC business keeps more than 5 cents of each dollar again in the first half of fiscal 2027.checked at the next results, due by 24 Nov
- Neutral→UnattractiveThe profit breaks
It needs:
- ○HP's 2027 forecast puts adjusted earnings below $2.80 a share.checked at the next results, due by 24 Nov
We would also be wrong if
- Printing keeps less than 16 cents of each dollar for two quarters without refunds.
- Ink and toner sales fall more than 5% a year.
What is coming
- 24 November 2026 Q4 fiscal 2026 results and fiscal 2027 outlook: Whether the October quarter is the margin low and what HP guides for fiscal 2027 earnings and cash.
Every dated event ahead
- 24 November 2026 Q4 fiscal 2026 results and fiscal 2027 outlook: Whether the October quarter is the margin low and what HP guides for fiscal 2027 earnings and cash.
- 15 January 2027 IDC and Gartner December-quarter PC counts: Whether HP's units still fall faster than the market's.
- 28 February 2027 Q1 fiscal 2027 results: Whether Personal Systems' margin climbs back toward its range as memory costs slow.
Since we wrote this
- 23 OctThesis writtenNeutral, medium convictionWritten a month before Q4 results, after the shares rose 62% in six months while IDC and Gartner showed HP's PC units down 31%.
Sources 15
Sources - 15
Every claim above cites one of these, or states the reasoning that derived it. The quote is frozen at the date it was read: a link can rot, and an agent fetch returns a reading of a page rather than the page. Backs counts the whole claim ledger, so it can name a claim this page does not surface.
- S01primarycompany filing2025-12-10what it sells, the segments, competition, the fiscal 2025 statements, supplies and printer units and the executive officersbacksC01C02C12C28
- S02primarycompany release2025-11-25fiscal 2025 EPS and free cash flow, capital returned, the dividend and the Fiscal 2026 PlanbacksC02C06C21C22C36
- S03primarycompany release2026-08-26the July quarter by segment, units, cash conversion and the raised fiscal 2026 guidancebacksC03C04C05C06C19C33C36C38
- S04primarycompany filing2026-08-27the balance sheet, the debt table, the nine months by segment, buybacks, the share count, tariff refunds and the restructuring planbacksC03C17C18C19C20C22C23C24C25
- S05primarytranscript2026-08-26HP third-quarter fiscal 2026 earnings call transcript (FMP), held 26 August 2026the PC market outlook, memory costs, the margin low, AI PC mix, supplies and print outlook, cash returns and the CEO search
PC units will decline high teens in the second half as pricing actions pressure demand.
backsC07C11C13C26C27C40 - S06primarycompany filing2026-02-25pay, the bonus scorecard, ownership and the executivesbacksC28C29C30
- S07primarycompany filing2026-02-03Lores leaving, Broussard as interim chief executive and his paybacksC26
- S08primarycompany filing2026-09-21no fiscal 2027 guidance yet and the planning assumption for 2027 PC unitsbacksC08C40
- S09secondaryindustry data2026-10-08PC shipments by vendor for the September 2026 quarter and IDC's reading of prices
HP recorded the steepest year-over-year decline among the top five vendors, with shipments falling 30.9%
backsC09C40 - S10secondaryindustry data2026-10-12Gartner's PC count, the DRAM cost rise and HP's exposure
HP Inc. recorded the steepest decline with shipments down 30.9% but maintained its No. 2 position.
backsC10 - S11primaryindustry data2026-09-08printer shipments and value, and ink tanks taking share
Worldwide hardcopy peripherals shipments continued to contract, declining by 7.0% year-over-year to 17.2 million shipments in the second quarter of 2026
backsC14 - S13primarycompany filing2026-03-16Dell's PC revenue and marginbacksC16
- S14primarycompany filing2026-03-17HP named among the larger print rivals, Xerox's print revenue and the Lexmark purchasebacksC15
- S15primaryvendor data2026-10-22Research pack for HPQ (FMP market tier, FINRA short interest, Form 4 insider trades), fetched 23 October 2026the 22 October close, returns and the move split, daily bars, multiples and their history, analyst ratings and estimates, earnings surprises, short interest and insider tradesbacksC31C32C33C34C35C36C37C38
- S16primarycompany filing2026-10-23revenue, margins, cash flow and share counts for fiscal 2021 to the trailing yearbacksC20C24C39