HP (HPQ) surged over 8% on today, with the stock trading near $27.10, as investors piled back in following a blowout second-quarter report that landed after Tuesday’s close.
The company posted revenue of $14.4 billion, up 9% year-over-year, and non-GAAP EPS of $0.86 against a consensus of around $0.72 – a beat of roughly 19%.
The Q2 result marked the eighth consecutive quarter of top-line growth, a run of consistency that the market had not fully priced in.
The Personal Systems segment’s operating profit jumped 30% year-over-year to a 5.2% operating margin, above internal expectations, as accelerated component reconfiguration and lower-cost inventory management absorbed more of the input cost headwind than analysts had modelled.
Personal Systems revenue rose to $10.2 billion, up 13% year-over-year, while Printing revenue was $4.2 billion and roughly flat, indicating PCs did most of the heavy lifting this quarter.
The divergence between the two divisions is becoming a defining narrative, with the AI PC cycle now clearly the engine while the legacy print business treads water. Management has pointed to AI PCs becoming the majority of its shipment mix within the next few years, a trajectory that underpins the case for continued re-rating from what remains a cheap valuation.
The full-year outlook was raised to non-GAAP EPS of $2.90-$3.10 and expected free cash flow of $2.8-$3.0 billion, while $374 million was returned to shareholders via dividends and repurchases in the quarter.
The upgrade was welcome, though CFO Karen Parkhill was candid about the road ahead. Rising input costs, particularly in memory and storage, are expected to pressure operating margins in the second half of 2026, with the broader PC market environment remaining challenging.
The reaction from the Street has been measured. Morgan Stanley maintained its Underweight rating with a $16 price target, while Evercore held an In Line rating with a target of $20. The gap in sentiment neatly illustrates where the debate sits – bulls see an AI-driven rerating from a single-digit P/E, bears see margin compression and a structural decline in print eroding the longer-term picture.
With Q3 fiscal 2026 results expected later in the summer, the margin trajectory in Personal Systems will be the number investors watch most closely to determine whether today’s rally has legs.
