Episode Details

HP Inc. (HPQ) Q3 FY2026 — Shares gapped 8.7% lower on the reaction session and were marked 12.4% down intraday, then closed -2.9% at $29.63 - and the next session took all of it back to $30.52, which is exactly where they closed before the release. HP added $1,836M of revenue to Personal Systems, up 18.5%, and the division earned $4M LESS than a year ago - an incremental margin of -0.22%. HP files the mechanism itself: average selling prices +40.8% and PC unit volume -15.8%, as a memory and storage cost shock was passed through in price. The only division whose profit rose is Printing, which shrank, and group segment profit only rose at all because a $127M tariff refund sits inside cost of revenue. THE CALL: HOLD (3/5, MODERATE) — base-case value ~$30.23 vs ~$30.52 today. KEY METRICS: - Net revenue $15,677M, +12.5% YoY (+10.9% constant currency) - a record third quarter - Personal Systems revenue $11,767M vs $9,931M - $1,836M added, +18.5% - Personal Systems segment profit $537M vs $541M - DOWN $4M on all that revenue - Incremental margin on the new revenue -0.22%; divisional margin 4.56% from 5.45% - HP files the split: average selling prices +40.8%, PC unit volume -15.8% - Price times volume reproduces the filed +18.5% revenue move to within 0.07 points - Units ran -7.0% in the April quarter and -4.2% across nine months - it is steepening - Printing revenue -2.2% (-$90M) but its segment profit +$28M, +4.1%, on 18.1% margins - Printing is 25% of revenue and 58% of group segment profit - A $127M IEEPA tariff refund is booked as a reduction of cost of net revenue - Group segment profit +$20M as reported; -$107M without that refund - Adjusted EPS $0.83, +10.7%; ex the stated $0.11 of refund it is $0.72, -4.0% - GAAP EPS $0.71 vs $0.80, -11.3%; gross margin 18.8% from 20.5%, 18.0% ex refund - FY26 adjusted guide raised to $3.19-$3.29 from $2.90-$3.10 - $0.19 of it is refund - Q4 adjusted guide $0.69-$0.79 against $0.93 last year: -20.4% at the midpoint - Free cash flow $1,568M in the quarter; FY26 guide raised to $3.0-$3.2 billion - Valuation $30.23 blended - DCF $31.58, 10.5x EV to cash $28.02, 10.5% yield $30.44 - Bear $20.64, bull $36.24; seven dated targets, median $23 - 24.6% BELOW the price - The tape requires only -0.22% perpetual growth against long-run inflation nearer 2.4% What to watch: PC unit volume returning to flat or better, the Personal Systems operating margin recovering above 5.45%, or adjusted EPS clearing $0.75 with no tariff refund in it would each break our thesis Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.