HP Inc Shares Fall 10% After Hours Despite Record Q3 Revenue Beat and Raised Full-Year Guidance

HP Inc. reported fiscal third-quarter 2026 results on August 26 that exceeded Wall Street expectations across nearly every metric, yet shares fell roughly 10.5% in after-hours trading as investors focused on deteriorating margins and a cautious demand outlook. Revenue came in at $15.68 billion, up 12.5% year over year and well above the roughly $14.38 billion consensus estimate. Adjusted EPS of $0.83 beat the $0.69 estimate by $0.14, though GAAP net income fell to $661 million, or 71 cents a share, from $763 million, or 80 cents a share, a year earlier.

Free cash flow reached $1.57 billion, nearly triple the $597 million estimate. Personal Systems revenue surged 18% year over year to $11.77 billion, while Printing revenue declined 2% to $3.9 billion. Non-GAAP operating margin contracted 0.6 percentage points to 6.5%, a sign of the commodity cost pressure that has concerned analysts.

HP raised its full-year adjusted EPS guidance to $3.19-$3.29 from a prior range of $2.90-$3.10, well above the $3.04 consensus, and lifted its free cash flow outlook to $3.0 billion-$3.2 billion. For Q4, HP guided adjusted EPS of $0.69-$0.79, which includes an 8-cent favorable tariff refund effect. The CFO warned that Q4 operating margins in Personal Systems will fall below Q3 levels before recovering into fiscal 2027, and that the company expects below-seasonal Q4 revenue given commodity-driven price increases.

The PC unit total addressable market is projected to decline high-teens percent year over year in the second half of the calendar year. HP's interim CEO said AI PCs are still expected to reach 50% of the company's shipment mix by fiscal year-end and that the company signed a three-year, $100 million agreement with RRD, one of the world's leading print service providers, during Q3. The CEO search for a permanent replacement is ongoing with no timeline given.

Separately, HP announced a multi-year global Wi-Fi patent cross-licensing agreement with Huawei, which remains on the U.S. trade blacklist since 2019. HP clarified in a blog post that it is not incorporating any Huawei components or technology into its products, describing the deal as a patent licensing arrangement only.