HP issues profit warning: Due to soaring storage chip costs and tariff pressures, full-year performance will be at the lower end of the guidance range

IT Home, February 25 — According to Bloomberg, HP Inc. released its earnings forecast for the current quarter, which may fall below market estimates. The company also stated that due to pressures from tariffs and rising storage chip prices, full-year profits could be at the lower end of previous projections.

In a statement, HP said that for the quarter ending in April, earnings per share (EPS), excluding restructuring costs and other items, will be between $0.70 and $0.76. Bloomberg data shows that analysts’ average expectation is $0.75. The company reaffirmed its previous forecast, expecting full-year EPS of $2.90 to $3.20.

“Given the increasingly volatile operating environment, HP now expects fiscal 2026 performance to be at the lower end of the guidance range,” the company stated.

HP’s stock closed at $18.20 in New York and fell about 7% in after-hours trading. Over the past 12 months, the stock has plummeted 48%.

Over the past year, this computer and printer manufacturer has shifted production of several products sold in North America to factories outside of China in an effort to mitigate the impact of U.S. tariffs. Now, as consumers upgrade old devices and purchase new computers with advanced AI features, HP and other device manufacturers are facing price hikes caused by shortages in storage chip supplies. The company said that storage chip issues will persist throughout the fiscal year and may extend into the next fiscal year.

In the first quarter of fiscal 2026, HP reported an adjusted operating profit margin of 6.9%, below the market average expectation of 7.4%. HP announced price increases, expanded supplier relationships, and adjusted some product designs to reduce storage chip usage. The company stated today that these measures have made progress, including completing certification of new suppliers.

“Despite ongoing volatility in storage chip costs, we are maintaining our full-year outlook based on just one quarter,” CFO Karen Parkhill said in the statement. “We have extensive experience managing industry headwinds and will continue to focus on executing our response plans.”

During the analyst call after the earnings release, Parkhill noted that storage chip prices doubled compared to the previous quarter and are expected to continue rising.

Last November, HP indicated that storage and component costs accounted for 15% to 18% of PC material costs; now, the company expects this ratio to rise to 35% in this fiscal year.

Earlier this month, PayPal appointed HP CEO Enrique Lores as its top executive. HP has designated board member Bruce Bursad as interim leader while searching for a new CEO.

“We have a good track record of managing commodity supercycles and uncertain environments,” Bursad said during the call.

IT Home notes that in the quarter ending January 31, HP’s revenue increased by 6.9% to $14.4 billion; EPS, excluding certain items, was $0.81. Analysts’ average forecast was $0.77 per share, with revenue of $13.9 billion.

HP’s Personal Systems segment (PC business) revenue grew 11% to $10.3 billion, surpassing the analyst average of $9.76 billion. Bursad stated that this growth was mainly driven by a 16% increase in consumer PC sales, with “AI-enabled computers continuing to sell well” as a key factor.

Bloomberg industry analyst Woo Jin Ho said that first-quarter PC sales exceeded expectations, partly because consumers upgraded their devices earlier than usual. She believes HP’s full-year outlook “indicates that, due to the storage chip crisis, market demand and profit margins may decline in the second half.”

HP also launched a multi-year cost-cutting plan aiming to save $1 billion annually by 2028, though this plan will also incur restructuring costs.