HP (NYSE:HPQ) Delivers Impressive Q2 CY2026 But Stock Drops

Personal computing and printing company HP (NYSE:HPQ) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 12.5% year on year to $15.68 billion. Its non-GAAP profit of $0.83 per share was 20% above analysts’ consensus estimates.

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“In the third quarter we increased both total sales and share in premium products and continued to attract new customers with innovations in WXP, Print, workstations and AI PCs. Our ongoing strategy to address environmental constraints led to meaningful improvements in memory supply and higher fulfillment rates,” said Bruce Broussard, Interim CEO, HP Inc. “The strong foundation we are building as a trusted edge platform positions us well to lead as AI evolves and allows us to help customers improve their AI economics, security, latency and governance.”

Company Overview

Born from the legendary Silicon Valley garage startup founded by Bill Hewlett and Dave Packard in 1939, HP (NYSE:HPQ) designs and sells personal computers, printers, and related technology products and services to consumers, businesses, and enterprises worldwide.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $59.16 billion in revenue over the past 12 months, HP is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because finding new avenues for growth becomes difficult when you already have a substantial market presence. To accelerate sales, HP likely needs to optimize its pricing or lean into new offerings and international expansion.

As you can see below, HP struggled to increase demand as its $59.16 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a poor baseline for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. HP’s annualized revenue growth of 5.3% over the last two years is above its five-year trend, suggesting some bright spots.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Commercial Personal Systems and Commercial Printing, which are 54.7% and 25% of revenue. Over the last two years, HP’s Commercial Personal Systems revenue (desktops, laptops, etc.) averaged 10.9% year-on-year growth. On the other hand, its Commercial Printing revenue (commercial or industrial printers) averaged 2.6% declines.

This quarter, HP reported year-on-year revenue growth of 12.5%, and its $15.68 billion of revenue exceeded Wall Street’s estimates by 7.5%.

Looking ahead, sell-side analysts expect revenue to decline by 3.2% over the next 12 months, a deceleration versus the last two years. This projection doesn’t excite us and implies its products and services will face some demand challenges.

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Adjusted Operating Margin

HP was profitable over the last five years but held back by its large cost base. Its average adjusted operating margin of 8% was weak for a business services business.

Looking at the trend in its profitability, HP’s adjusted operating margin decreased by 1.5 percentage points over the last five years. HP’s performance was poor no matter how you look at it – it shows that costs were rising and it couldn’t pass them onto its customers.

In Q2, HP generated an adjusted operating margin profit margin of 6.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

HP’s EPS was flat over the last five years, just like its revenue. This performance was underwhelming across the board.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

HP’s two-year annual EPS growth of 1% was subpar and lower than its 5.3% two-year revenue growth.

Diving into the nuances of HP’s earnings can give us a better understanding of its performance. While we mentioned earlier that HP’s adjusted operating margin was flat this quarter, a two-year view shows its margin has declined. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, HP reported adjusted EPS of $0.83, up from $0.75 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects HP’s full-year EPS to shrink by 17.9% from $3.43 to $2.82.

Key Takeaways from HP’s Q2 Results

It was good to see HP beat analysts’ EPS expectations this quarter. We were also excited its EPS guidance for next quarter outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. Investors were likely hoping for more, and shares traded down 8.6% to $27.89 immediately after reporting.

So do we think HP is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).