HP Inc.

Good day everyone and welcome to the second quarter 2026 HP, Inc. earnings conference call. My name is Krista and I'll be your conference moderator for today's call. At this time, all participants will be in a listen only mode. We will be facilitating a question and answer session towards the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Alok Juyal, Global Treasurer and Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to HP's second quarter 2026 earnings conference call. With me today are Bruce Broussard, HP's Interim Chief Executive Officer, and Karen Parkhill, HP's Chief Financial Officer. Before handing the call over to Bruce, let me remind you that this call is a webcast and the replay will be available on our website shortly after the call for approximately one year. We posted the earnings released and accompanying slide presentation on our investor relations webpage at investor.hp.com. As always, elements of this presentation are forward-looking and are based on our best view of the world and our business as we see them today. For more detailed information, Please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties, and assumptions. For a discussion of some of these risks, uncertainties, and assumptions, please refer to HP's SEC reports, including our most recent Form 10-K. HP assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in HP's SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding year-ago period. In addition, unless otherwise noted, references to HP channel inventory refer to Tier 1 channel inventory and market share references are based on calendar quarter information. Unless otherwise specified, all financial measures discussed today are non-GAAP and EPS refers to non-GAAP diluted net earnings per share. Please refer to the tables in today's earnings release and the accompanying slide presentation on our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. With that, I will now turn the call over to Bruce.

Thank you, Alok, and thanks, everyone, for joining us today. I want to start by saying how much I appreciate the opportunity to lead HP during this important time for the company. Through the efforts of our team around the world, we continue to advance our future of work strategy and help our customers navigate one of the most significant technology shifts ever due to AI. I want to recognize and thank the entire HP team for the focus, discipline, and agility they demonstrate every day. As interim CEO, I have spent significant time with customers, partners, and employees. What I've seen is an organization that's moving with speed, focus and urgency to strengthen our market position and accelerate innovation that benefits our customers. This is translating into strong results in a complex operating environment. Our second quarter performance underscores both the resilience of the business today and the opportunities we see ahead. Today, I'll share the innovations we're bringing to market. Across our portfolio, the results we delivered this quarter as well as how we're planning for the environment ahead. But first, let me address one topic I know is top of mind, the CEO search. As a reminder, the Board established a search committee and engaged an external search firm. We're looking for a leader with the following attributes. First, a proven track record of creating long-term value for customers and shareholders. Second, the ability to operate effectively in a complex and rapidly changing environment, like many companies are navigating today. Lastly, global and multi-segment business experience. We are engaged in a comprehensive process to select the best leader for HP. While we're not in a position to provide a timeline, the board is actively evaluating candidates who align with HP's needs. Turning to innovation, let me share how we're bringing our strategy to life across the company. As work evolves, organizations face critical decisions about their IT infrastructure, and employees are adapting to new ways of working, especially in the age of AI. AI innovation is accelerating, adoption growing rapidly across enterprises. Customers are becoming more thoughtful about where AI workloads run. AI is transforming computing from passive devices to context-aware intelligent systems. Companies like HP that own the trusted edge, the workflow context, and the orchestration layer between local and cloud intelligence will be positioned to thrive in this environment. Rising cloud costs associated with agentic AI, along with latency, privacy, and security considerations are driving demand for AI workloads at the edge. As a result, customers are building AI at the edge using smaller, open source and proprietary models with more capable hardware and secure software layers. HP is enabling the future of work by providing the essential tools and technology necessary for this transformation. Our devices and software stack support this shift with strong architectural capabilities for edge inferencing and new AI workload. We are becoming the trusted intelligent edge provider connecting devices, workflows, context, and physical environment. We continue to believe the future of AI is hybrid, with edge playing an increasingly important role over time. Building on this opportunity, we recently unveiled a wave of innovation at our HP Imagine event, our annual global technology showcase of new products and solutions. In personal systems, we introduced the next generation AI PCs and expanded local AI capabilities with an ecosystem of more than 150 software companies of all sizes. Previously, we highlighted our collaboration with partners like Zoom and CrowdStrike. Today I want to showcase other software partners. GoodNotes, for example, is leveraging the NPU for local audio transcription and summarization, while AI Producer is transforming our AI PCs into professional production studios. These are just a few examples of how we are enhancing productivity, output, and workflow experience for our customers. To bring data center capabilities directly to the desktop in order to support the most demanding AI and compute workloads, we introduced new Z workstations and AI stations. These purpose-built devices enable customers to develop, run inference, and scale AI workloads, providing greater control over token costs, latency, and enterprise data security. In print, we launched a new LaserJet series with AI-enabled document workflows, quantum-resistant security, and up to 50% faster document handling, making work easier and more secure. We're also extending innovation into areas like construction and design, connecting physical and digital workflows to help teams stay aligned from the office to the job site. Also this quarter, we introduced the HP MultiJet Fusion 1200, bringing industrial 3D printing capabilities into a more compact, accessible system design to help customers move from prototyping to production closer to where work happens. We're also creating better together experiences across our portfolio with the introduction of HP IQ. This is a groundbreaking intelligence layer that coordinates seamless, integrated experiences across all our products. A key feature is HP NearSense, a new spatial intelligence that helps devices easily discover and connect to each other. The goal is to make tasks like file sharing, joining meetings, and moving between environments feel more intuitive and effortless. As work becomes more connected yet distributed, IT teams need simpler ways to manage, secure, and optimize environments. That's why we've enhanced our Workforce Experience Platform, known as WXP, with AI-driven tools for proactive management of personal endpoints and shared spaces. WXP actively manages over 5.2 million devices across 180 countries. These innovations represent our commitment to creating more connected experiences across devices, software, services, and security. They reflect our one HP approach and action, which we believe positions as well to create more value for our customers and partners. We're seeing strong customer interest in these new innovations, which underscores our approach and a growing customer demand for our solution. Let me turn to our quarterly results. In February, I said our focus would be on prudent execution, taking the right cost action, and continuing to advance our future of work strategy. I'm pleased to report we delivered against those commitments in Q2. Revenue grew 9% year over year, marking the eighth consecutive quarter of top-line growth, led by strong personal systems performance. while print results were in line with expectations. Importantly, the quarter reflected not just growth, but discipline execution. We continued to grow in high-value categories and accelerate our mitigation strategy to manage commodity cost pressures, which allowed us to deliver EPS above our guidance. Let me turn to segment performance. In personal systems, revenue grew 13% year over year with strong growth in both commercial and consumer. This includes continued momentum in AIPCs, which increased from more than 35% to 44% of our shipment mix in the quarter, as well as continued strength in advanced compute solutions and workforce solutions. In print, revenue was flat year over year in a competitive market, as expected. We remained focused on pricing discipline and placement of profitable units, and gain share in big tank printers in line with our strategy. Industrial Graphics delivered its 11th straight quarter of revenue growth with momentum in hardware, supplies, and services. Turning to the external environment, we continue to navigate a challenging supply and cost environment while remaining focused on discipline execution. In Q2, as anticipated, memory and storage costs increased sequentially. We expect this trend to continue in the second half of 2026 with cost increasing in Cisco Q3 and Q4. Our strong execution of the mitigation strategies we outlined in February has strengthened our ability to navigate future headwinds. Let me walk through the strong progress we have made in our four pillar plan. First, through our strong supplier relationships and long-term agreements, we are confident we have the memory and storage that we need for this fiscal year. Second, we fully operationalized a planning model that tightly aligns supply, demand, and product configuration decisions. This gives us greater flexibility to respond in real time and better positions the right products, the right markets, to meet customer demand. Third, our strategic inventory helped us remain cost competitive and maintain supply continuity. We continue enrolling new suppliers, taking strategic inventory positions, strengthening our operational muscle through demand steering activities, and expanding our attached businesses. Lastly, we remain disciplined on both pricing and cost. We executed a differentiated repricing strategy, prioritizing strategic customers, distributors, and countries. We also executed across multiple cost levers, including sourcing optimization, platform cost reduction, and companywide productivity actions to help offset ongoing pressures while continuing to invest in the business. Looking ahead, we expect the memory and storage environment to remain constrained. In addition, we also anticipate broader inflationary pressures beyond memory and storage, including oil prices and their downstream effects. To help mitigate these headwinds, we will continue to leverage the operational capabilities and discipline we've strengthened in Q2. We remain focused on driving long-term growth by leveraging our strong portfolio, go-to-market reach, supplier relationships, and innovation pipeline, In closing, we're confident in our future of work strategy and the significant opportunity ahead as AI continues moving to the edge. We believe our continued focus on innovation and discipline, execution, positions as well to drive sustainable growth and long-term shareholder value. With that, I'll turn it over to Karen.