HP Inc. Reports Strong Q3 Results Led by AI PCs, Boosts FY Guidance

HP Inc. (NYSE: HPQ) delivered a standout performance in its fiscal third quarter ended July 31, 2026, driven by accelerating demand for AI‑powered PCs and disciplined execution. Personal Systems delivered robust growth, free cash flow surged, and management raised full‑year earnings expectations.

Q3 Performance Highlights

HP posted net revenue of $15.7 billion in Q3, reflecting a 12.5 % year‑over‑year increase. This gain was fueled by strength in the Personal Systems segment and the rising share of AI PCs in its product mix. In contrast, Printing revenue was roughly flat, aligning with expectations. These figures were corroborated by summarized earnings data this month. 

Non‑GAAP diluted net EPS rose 10.7 % year‑over‑year to $0.83, above prior guidance. GAAP diluted net EPS was $0.71, down relative to the prior year due to one‑time items, but still indicative of solid core performance. Free cash flow for the quarter reached approximately $1.6 billion, with about $600 million returned to shareholders through dividends and share repurchases. 

Key Business Drivers

The Personal Systems unit—encompassing AI PCs and premium devices—grew by approximately 18 %. This acceleration underscores HP’s ability to capture demand for advanced compute capabilities. Gross margin stood at 18.8 %, impacted by elevated commodity costs and a mix shift toward higher‑margin AI PCs. The company also reported negative 37 days in its cash conversion cycle, underscoring efficient working capital management. 

On the printing front, revenue growth was modest or flat, although management emphasized strategic execution in AI‑driven print features and subscriptions. Cost mitigation and supply chain agility also supported margin recovery across segments. 

Upgraded Outlook for FY 2026

Encouraged by Q3 results, HP raised its full‑year fiscal 2026 outlook. For GAAP diluted net EPS, the company now targets a range of $2.52 to $2.62; on a non‑GAAP basis, the new range is $3.19 to $3.29—both including an estimated $0.19 in tariff refunds. Q4 EPS expectations are $0.74–$0.84 GAAP and $0.69–$0.79 non‑GAAP, reflecting an $0.08 benefit from tariff relief. Free cash flow guidance was boosted to a range of $3.0 to $3.2 billion. HP cautioned that commodity cost pressures persist and margins may soften in Q4 before improving into FY 2027. 

Why It Matters for Investors

This quarter’s results mark a clear pivot toward AI‑driven hardware innovation. By increasingly embedding AI capabilities across its premium device lineup, HP is differentiating itself in a competitive PC market. The strong free cash flow delivery and share repurchase activity reflect disciplined capital allocation, while the raised guidance signals management’s confidence in navigating cost headwinds.

What’s Next

Investors will be watching upcoming earnings calls for updates on AI PC shipments, pricing trends, and margin trajectory as cost pressures evolve. HP’s ability to sustain momentum through broader macro cycles, particularly in the premium and AI segments, will be key to its near‑term valuation. Further progress in printing—through AI features, subscriptions and industrial growth—may also help rebalance legacy reliance on Personal Systems.