Good day, everyone, and welcome to the First Quarter 2026 HP Inc. Earnings Conference Call. My name is Regina, and I will be your conference moderator for today's call. 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 First 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 a replay will be available on our website shortly after the call for approximately 1 year. We posted the earnings release and accompanying slide presentation on our Investor Relations web page 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. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the comparable GAAP information. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. With that, I will now turn the call over to Bruce.

Thank you, Alok, and thank you, everyone, for joining us here today. I'm excited to be here with you for my first earnings call as interim CEO. I have served as a director on HP's Board since 2021, and I, along with my fellow board members, strongly believe in the management team and the strategic direction we are charting at HP. I'd like to also acknowledge Enrique Lores and his contribution to the success of the company during his 36-year tenure. We are sincerely grateful to him. The Board and I are committed to a strong stewardship, including disciplined decision-making, operational consistency, stability for our employees and delivering value for our customers and shareholders. With that in mind, I want to provide a brief update on the CEO search. The process is well underway. The Board's priority is to identify the right leader to guide HP through its next phase of evolution. We will consider a broad range of candidates with a preference for proven executives who have successfully operated large multi-segment businesses in a complex and dynamic environment. During my first few weeks since we've announced the CEO transition, I've immersed myself in the company. I've met with thousands of employees and spent considerable time talking with customers and suppliers. We've also had the opportunity to work closely with the leadership team. I want to thank the employees, suppliers and customers for the warm welcome. Together, these discussions give me a clear view of the opportunity ahead and deep confidence in what the organization can deliver. We are at an exciting inflection point in technology, where customers need a trusted partner to enable edge computing, simplify experiences through integrated solutions and embed AI into products that proactively anticipate users' needs. This is the foundation of our Future of Work strategy, which positions us to expand market share and ensures our pricing reflects the value we deliver, especially as we navigate near-term challenges. We will stay disciplined in executing our fiscal '26 plan, which you'll hear more about today, taking great care of our customers, partners and suppliers and continuing to build a company where people are proud to work and grow. I'm working directly with the talented HP leadership team to ensure we are actively managing every lever available to us to drive value creation. With that, let's get into the quarter. Overall, we executed well in Q1 and made solid progress against our strategy. Karen will cover the details shortly, but let me highlight a few points. We delivered another quarter of steady top line growth with revenue of $14.4 billion, up 7% year-over-year, driven by performance in Personal Systems, as we continue to see the positive impact on PC demand in the Windows 11 refresh cycle and the continuing momentum of AI PCs. We achieved PC market share gains across our high-value Commercial and Consumer categories, contributing to our double-digit revenue growth in the segment. In print, our results were in line with expectations with continued momentum in Consumer subscriptions, which grew revenue double digit and industrial print, which grew mid-single digit with a continuing shift from analog to digital production. We prioritized the placement of profitable units and grew Big Tank share in developed markets. Non-GAAP EPS of $0.81 reflected 9% growth compared to the prior year and was at the top of our guidance range. Turning to our strategic advancement highlights. HP is dedicated to creating a more fulfilling professional experience. In the first quarter, we made meaningful progress bringing AI to the workplace through innovation. HP's focus on AI at the edge reflects an increasingly critical role of this technology in the daily lives of our customers. As the AI curve moves from an experiment to scale deployment and measurable returns, we are enabling customers with compute power to run powerful large language models locally, complementing AI in the cloud with secure, high-performance and cost-effective AI at the edge. This is an important part of our Future of Work strategy. This quarter, AI PCs accounted for over 35% of our PC shipments, up from 30% in the prior quarter and 25% a quarter before. We also launched the HP EliteBoard G1a, the first AI PC with intelligence built into the keyboard for hybrid work, and is just one example of how we are bringing on-device architecture to life. In print, our new AI-powered scanning and redaction capabilities are now reaching customers, simplifying workflows and reducing friction for small businesses. Our focus on delivering more secure and AI-enabled print experiences is also being recognized with industry analysts recognizing our leadership in AI-driven print solutions. The next step in our strategy is driving Better Together experiences. We believe there is enormous value in integrating devices, software and services to work as a unified experience. In the first quarter, we launched HP Digital Passport, a personalized hub that centralizes information across the full HP ecosystem, resulting in better customer engagement and more efficient support. We also expanded our partnership with Microsoft, embedding Microsoft 365 Copilot directly into HP printers to improve how employees manage documents on the device. This brings us to our third step, empowering CIOs with tools to gain actionable insights, manage risk and run IT more strategically at scale. To that end, we introduced multiple enterprise-focused updates in Q1, expanding our workforce experience platform capabilities to simplify device and printer management while reducing downtime. WXP is now the most comprehensive multivendor fleet management solution across PCs, print and collaboration. By taking in data from 50 million endpoints and processing more than 1 terabyte of data daily, the platform enables predictive insights that allow IT teams to proactively identify issues, streamline operations and improve workforce productivity. In addition, this month, HP established an exploratory partnership with OpenAI to pilot OpenAI Frontier, their new enterprise platform for building and managing AI agents. This puts HP at the forefront of enterprise AI deployments with built in governance, security and observability as we move from pilots to scaled adoption across workflow. In March, we will host our HP Imagine event for industry and media analysts, showcasing our latest innovative solutions to help people do their best work from anywhere. The new experiences we unveil at HP Imagine will demonstrate how we continue to lead the Future of Work by helping customers drive growth, professional fulfillment and foster innovation in the era of AI. Now let me touch on the rising memory cost environment and how HP is addressing these market challenges, which are impacting companies across the technology sector. Like others, we are seeing increased input costs driven primarily by the rising prices of DRAM and NAND. We expect this volatility to remain throughout fiscal '26 and likely into fiscal '27. While we believe the market will rationalize over time, we have already been implementing a number of mitigation measures. And since I moved into this role, I've been actively working with the team to drive these actions forward, make adjustments where needed and bring as much of the memory dynamic as we can under our control. To get a bit more granular on these mitigation measures, let me focus on progress of our key strategies. First, on the supply side, we have leveraged the strength of our supplier relationships and secured long-term agreements covering our memory requirements for fiscal '26. We've qualified new suppliers, built in strategic inventory positions for key platforms and cut the time to qualify new material in half to accelerate our product configuration changes. Second, on the cost side, we've expanded lower-cost sourcing across our commodity basket, lowering logistics costs with agile end-to-end planning processes as part of the company-wide AI-enabled program. And we've accelerated company-wide productivity efforts as part of this program to utilize the company-wide broader cost base to execute offset. Third, at the same time we are implementing strategies on supply and cost. We are also configuring our products and shaping demand to align the supply we have with our customer needs. We are taking targeted pricing actions to offset the remaining cost impact in close partnership with both our channel and direct customers. We have a strong track record of managing through commodity super cycles and uncertain times. We've demonstrated this during the pandemic and more recently through trade cost uncertainty. We built a more resilient supply chain and leveraged our strong brand and distribution strength to gain share and expand margin. HP is also well diversified with a meaningful portion of our Personal Systems profit coming from services and peripherals. While the near-term environment will remain challenged and pressured PS margins, we are confident the actions we are taking will position us for long-term success. I also want to touch briefly on last week's U.S. Supreme Court ruling on tariffs. We are evaluating the impact of including the announcement of new tariffs in the last few days. Right now, we do not expect to be negatively impacted by the subsequent developments following the court decision. However, we will continue to engage the administration on these matters and others. We are confident in the strength and agility of our supply chain, which provides the flexibility needed to navigate an uncertain trade-related cost environment. In this fluid operating environment, fiscal '26 will be shaped by a range of factors, some of which remain uncertain. Our focus will be on prudent execution of mitigation plans to offset the impact of memory costs, accelerate company-wide cost actions and continue to execute against our Future of Work strategy. We expect that the memory situation will normalize at some point. In the meantime, we are not backing away from our long-term commitments despite the headwinds. And my focus is to ensure we continue to move forward with urgency and discipline without missing a beat. Before I close, I want to say what an honor it is to be part of the HP team. This is a special company, and I have great respect for our mission, culture and people. To our shareholders, thank you for your continued belief and confidence in HP. And to our employees around the world, thank you for your dedication and commitment. I am proud to be on this journey with you. Lastly, I want to provide an update on the Investor Day we had planned for April. In light of our ongoing CEO transition, we will be rescheduling this and look forward to sharing a date with you at the right time. I'll now hand it off to Karen to walk through the first quarter results and outlook for the remainder of the year.

Thank you, Bruce, and good afternoon, everyone. We are pleased with our first quarter results and the solid progress we made on delivering against our financial commitments. We drove better-than-expected top line growth, fueled by continued refresh momentum in Personal Systems and in our key growth areas. We also delivered non-GAAP EPS at the top of our guidance range. In a dynamic environment, our teams executed well, making progress on the playbook we laid out at the beginning of the quarter to mitigate higher input costs. As you heard from Bruce, our initiatives are focused on securing supply, shaping demand and product configuration, implementing targeted cost reductions and taking pricing actions, and all of these are well on track. While the memory situation remains fluid, we are executing well on all of the levers within our control and will continue to do so in the quarters ahead. Now let me walk you through our first quarter performance. We delivered revenue growth of 7% year-over-year, up 5% in constant currency with growth across all regions. Strength in Personal Systems drove APJ revenue up 13% in constant currency, with EMEA and Americas growing 5% and 1%, respectively. Gross margin was 19.6%, reflecting an increased mix from Personal Systems as well as higher commodity and trade-related costs, offset in part by pricing and cost reduction actions. We drove non-GAAP operating expenses down year-over-year through strong expense management and the continued benefit from our Future Ready cost savings program, completed at the end of fiscal year '25. All in, our non-GAAP operating margin was 6.9%. Below the operating profit line, lower net financing expense and lower currency impact contributed to better-than-expected non-GAAP other income and expense in the quarter. With a diluted share count of approximately 932 million shares, our non-GAAP diluted net earnings per share was $0.81, up 9% year-over-year. Now let's turn to segment performance. We delivered better-than-expected top line growth in Personal Systems with revenue up 11% on 12% unit growth, with continued momentum in Win 11 refresh, AI PC adoption and particularly strong Consumer performance. We outperformed the market and consistent with our strategy, gained share in premium categories. We also drove strong performance in key growth areas, including AI PC, Advanced Compute Solutions and Workforce Solutions. In Consumer, we delivered 16% revenue growth on a 14% unit increase, above our expectations. We attribute part of this above seasonal performance to demand pull-in aimed at avoiding the impact of rising memory prices. At the same time, we drove increased ASPs while delivering share gains in premium consumer devices. In Commercial, we drove 9% revenue growth with units up 11%, fueled by Win 11 refresh, particularly in EMEA and AI PC strength. While we increased prices to help offset rising memory costs, we also had some large education deals in the quarter that impacted ASPs. Consistent with our Future Work strategy, we gained share both year-over-year and sequentially in commercial premium categories. Our operating margin in Personal Systems was 5%, within the range we guided at the beginning of the quarter but slightly below expectations, given the stronger-than-expected performance in consumer and education. In print, our results were in line with expectations with improvement in the rate of market decline. Revenue was down 2% on lower supplies volumes and market-driven hardware declines. Consumer revenue was down 8% year-over-year and Commercial revenue down 3%, with higher ASPs helping to offset lower volumes. Supplies performed as expected, down 2% year-over-year in constant currency. We continue to gain share in supplies while increasing pricing to partially offset installed base and usage headwinds. We delivered solid performance in our key growth areas. Consumer subscriptions grew double-digit year-over-year, helped by the continued ramp of our All-in-Plan and reflecting our focus on increasing lifetime value per customer. Strong demand in drones and robotics drove double-digit growth in 3D and industrial print revenue, which grew for the tenth consecutive quarter, driven by the continued transition from analog to digital. And in line with our guidance, we delivered an operating margin of 18.3%, within the upper half of our long-term range. We are making solid progress on our initiative to embed AI into our processes to accelerate product innovation, improve customer satisfaction and boost productivity. For example, we are working to integrate AI into our channel partner experience through a digital teammate that will answer questions, act on queries, provide integrated workflows and proactively guide next steps. We are also scaling additional AI agents and supply chain to automate order entry, sales returns and product data management. We remain on track to generate approximately $1 billion in gross annualized run rate savings by the end of our fiscal year 2028, and are actively working to accelerate and scale these initiatives. These important efforts enable our continued investment in key strategic and go-to-market initiatives aligned with our Future of Work strategy. Now let me move to cash flow and capital allocation. We generated close to $400 million in cash from operations and roughly $200 million in free cash flow in the quarter, in line with our expectations and reflecting typical seasonality. We improved our cash conversion cycle sequentially, with unfavorable linearity offset in part by higher days of inventory, reflecting rising commodity prices. On capital allocation, we remain committed to returning approximately 100% of our free cash flow to shareholders over time as long as our gross leverage remains under 2x, and there aren't better return opportunities. In Q1, we returned over $600 million to shareholders through both dividends and share repurchases. While our leverage ratio remains slightly above target in Q1, we have maintained increased cash balances, reserving sufficient funds to pay down 2026 debt maturities, which enabled us to buy back shares in the quarter. If needed, as we move through fiscal '26, we can operate with higher cash balances to further reduce leverage with maturities in fiscal '27. As we look ahead, we have contemplated the dynamic memory environment highlighted earlier as well as the associated mitigation actions we are taking. These include expanding pricing actions and implementing additional company-wide cost reductions. As Bruce mentioned, we are evaluating last week's U.S. Supreme Court tariff ruling and the subsequent developments, but at this point, do not expect to be negatively impacted. Looking at our outlook by segment. In Personal Systems, we are aligned with industry experts now projecting the PC unit TAM to decline double digits in calendar year '26, reflecting the impact of industry-wide pricing actions on demand. Against this backdrop, we continue to expect to drive revenue growth in our fiscal year through pricing actions, share gains in premium categories and increased attach of higher-margin offerings. We expect above seasonal revenue performance to continue in our fiscal Q2, driven largely by the pricing actions we have taken, with revenue growth then moderating in the back half of the year. Considering the continued fluidity of the commodities market, we are modeling a range of outcomes that factor in memory prices that are roughly doubling versus the prior quarter. Given this, we now expect the PSOP rate to be below our long-term range for the remainder of the year, reflecting this additional cost pressure offset in part by mitigation actions. In print, we continue to expect the hardware market to decline low single digits in calendar '26, yet we expect to drive growth in Big Tanks and industrial print to help offset. We are continuing to execute against our plans to gain share in Big Tank and office and to drive further momentum in key growth areas, expanding our subscription business and driving growth in industrial. While we continue to anticipate Supplies revenue to be down low single digits for the year in constant currency, we expect to drive both pricing and share gains. For Q2, we expect print revenue to be in line with normal seasonality. We now expect print operating margins for both Q2 and the full year to be near the top end of our long-term range, with our focus on profitable unit placement and incremental cost discipline helping to offset the impact we expect to have on PS margins. Beyond the segments, we expect both non-GAAP OI&E and Corporate Other to be roughly flat year-over-year for the remainder of the year. Factoring all this in, we are maintaining our annual non-GAAP diluted earnings per share guidance range of $2.90 to $3.20. Given an increasingly challenging operating environment, and the time it takes to fully implement our mitigating actions, at this point, we expect to be closer to the lower end of our guidance range. We recognize that the environment remains fluid, and we are pulling every lever available to offset these unprecedented headwinds. For Q2, we expect non-GAAP diluted net earnings per share to be in the range of $0.70 to $0.76. Our second quarter GAAP diluted net earnings per share to be in the range of $0.52 to $0.58. We are also maintaining our annual free cash flow guidance range of $2.8 billion to $3 billion. However, consistent with our comment on EPS, given the environment, we currently expect to be closer to the low end of that range. In closing, we are making solid progress against our financial commitments. We have a track record of strong execution and remain confident in our ability to navigate these near-term headwinds while also focusing on driving long-term shareholder value. Before we move to Q&A, we've been talking to you about the strength of our leadership team and particularly given the memory situation; we wanted to make sure you got the chance to hear directly from the leader of our PS business on that topic. So we've invited Ketan Patel to join us for this Q&A session.

Our first question will come from Krish Sankar with TD Cowen.

For Bruce or Kevin or even for Ketan. I understand you're operating well in a tough and fluid commodity environment. I want to find out if you can quantify what is the memory cost impact in Jan quarter? What is baked in terms of the memory cost increase in April and fiscal year? And along the same path, with your memory suppliers, are you able to secure LTAs for volume only? Or is it volume and pricing? And then I had a quick follow-up.

Thanks, Krish, for that question. I'll start, and then I'll ask Ketan to add on. Regarding the memory cost this quarter, it was included in our overall results. Given the current volatility in memory, we won't try to quantify that after mitigation actions. I can say we have factored in a significant rise in memory costs into our guidance. We have seen memory costs increase by approximately 100% sequentially, and we expect that to continue rising as we enter the fiscal year. To provide some concrete numbers, we mentioned last quarter that memory and storage costs constituted about 15% to 18% of our PC bill of materials, and we now estimate this figure to be around 35% for the year. As we've mentioned, we anticipate the most significant impact in the second half. Because of this, we now expect our PSOP margins to be below our long-term range for the remainder of the year. However, we are diligently working to mitigate these challenges through a combination of product cost actions, company-wide cost actions, and price increases to help us recover this impact over time. Ketan, feel free to add anything.

You covered it well, Karen. I'll just add one thing, Krish, is that given the volatility of the situation, we have a range of mitigation actions, which we are working on, and we have managed this type of disruption before. We are using our playbook to ensure how we navigate this volatility with two vectors in mind: continue to provide strong value to the customer; and then protect our margins. And this is delivered through, number one, managing supply and portfolio. We have LTAs, which obviously protects our supply coverage. We also want to leverage part of our broad portfolio with silicon diversity so that we can offer different choices to customers in order to ensure how we do the demand-supply equation matching and also introduce low memory configurations. Cost actions, as Karen has already covered. We keep working across commodity baskets to reduce costs as much as possible so that we don't pass it on to the customers. We have strong design for cost initiatives which includes platform offerings and other decontenting options in order to make sure the customer gets various choices. And also lastly, it's about pricing actions, driving favorable mix to our strategy and then most importantly, we'll be demand shaping to the available supply we have with optimized platform and config options so that the customer gets the best value to choose from and also within their budgetary needs. That's why this playbook is super important that we are working across various vectors to ensure we are delivering the right value equation for the customer.

Very helpful, Karen and Ketan. Just a quick follow-up. You kind of mentioned the PC unit TAM to decline double digits. I'm just wondering, is there a way to quantify it? Is it low teens, high teens, down 20%? And any specific segment which will decline more than the others?

Yes. Thanks for that question, too. Yes, we do expect it to be down double digits, in line with many in the industry. Ketan, feel free to add.

No, it's pretty much in line. We also believe that the opportunity to grow revenue as we have given the outlook for the rest of the year will be there, fundamentally, because we see momentum on Windows 11 and also mix shift on AI PCs, as Bruce covered that we are at 35% mix now, and it's only increasing every single quarter. Pricing and other actions are only going to drive mix expansion on revenue TAM. So very much we are in line with what the industry forecast is.

Our next question will come from the line of Erik Woodring with Morgan Stanley.

I have 2. Karen, maybe starting with you. I don't want to overly focus on memory, but can you just help us understand how you at least approach guiding for the full year, understanding that memory cost beyond this quarter are largely uncertain, but likely to inflate further, meaning what kind of memory price appreciation are you embedding in your fiscal '26 guide today? And then how are you kind of balancing the potential for demand destruction versus protecting margins? And what that all means for EPS? I just love the approach that you're taking given all these uncertainties? And then a quick follow-up, please.

Thank you for the question, Erik. Things are still evolving, but I want to start by saying that we're satisfied with our Q1 performance, especially with the better-than-expected revenue in PS and EPS at the top of our anticipated range. Our guidance for Q2 suggests continued revenue growth that exceeds typical seasonal patterns, driven by pricing increases and benefits from the Win 11 refresh and growing AI PC adoption. Looking at the full year, I would highlight three key factors affecting our outlook. First, we experienced solid revenue, particularly in the first half. Second, while we are facing rising memory costs, those will be partially mitigated by our higher mitigations that we've discussed. Third, we now expect our print margins to be at the upper end of our long-term range. Taking all this into account, we're adopting a cautious perspective, anticipating that some of our revenue strength in the first half will begin to slow, and our fiscal year EPS will be more heavily weighted toward the first half than usual. It's clear we are operating in a rapidly changing environment, and we are committed to executing our strategies. We will do everything possible to counteract these challenges and will keep you informed as we move forward. However, based on our current assumptions regarding memory costs, which include a significant sequential increase this quarter and additional rises thereafter, we also recognize that price increases may take time to implement fully, along with the expected unit demand we’ve mentioned. Given all of this, we anticipate being at the lower end of our guidance range.

Okay. I appreciate all that detail, Karen. And then maybe just as a follow-up. I'd love if you could maybe clarify a bit on capital returns. I know that you kind of talked about remaining committed to 100% return of free cash flow to shareholders over time. But I guess you're balancing two factors butting up against your gross leverage target that would limit buyback versus your stock at a multi-year low. So just how do you balance these factors and think about returns to shareholders in fiscal '26 with just a little bit more clarification to detail.

Yes. Thanks, Erik. We remain dedicated to returning all of our free cash flow to shareholders over time, provided our gross leverage stays below 2x and we don't find higher return opportunities. Currently, our leverage is slightly above 2x, and we have set aside cash on our balance sheet to pay down debt as it matures in 2026, and we can continue this into 2027 if necessary. This strategy has allowed us to also return funds to shareholders. In the first quarter, we were pleased to return approximately $600 million to shareholders, with over $300 million of that coming from share repurchases.

Our next question will come from the line of Samik Chatterjee with JPMorgan.

I know you mentioned that this is a dynamic environment and you're seeing some level of pull-in in the PS segment. I'm curious if you could elaborate on that a bit more. Is the pull-in primarily on the Consumer side right now? How are you differentiating that from any pull-in on the enterprise side? I want to understand your thought process and what it means for the second half regarding revenue outlook for those two segments. I also have a quick follow-up.

Thanks, Samik. I'm happy to take that. Ketan, feel free to add. We did see a moderate amount of customer demand pull-in in the quarter, particularly in Consumer. That said, we also delivered stronger-than-expected revenue growth, and that was really driven by several key factors including the strength of the fundamentals on the Win 11 refresh and on AI PC adoption. AI PCs were 35% of our total shipments in Q1, up from 30% in the prior quarter and honestly, 25% the quarter prior to that. In enterprise demand, we had good demand, particularly in Europe and in Asia, related to the Win 11 refresh cycle. We believe now that about 60% has refreshed to date, so that means we still have more to go. We did increase prices along with a shift in product mix towards commercial and consumer premium devices, which contributed to higher average selling prices. So Ketan, happy for you to add.

Yes. So Samik, I'll just add a couple of comments. To our regular operational metrics, we have not observed any major disconnect from customer demand pattern versus market growth, especially on the Commercial side. In Consumer, as Karen said, there was a bit of pull-in in the month of December is what we observe, and we can consistently measure sell-out versus our selling data to look at that. The other proof point is that our channel inventory remains at a very healthy level, which means the customer demand powered by AI PCs and Windows 11 has been strong in the geographies just called out.

Got it. Great. And maybe just a quick follow-up. Karen, probably more for you. I know you've sort of talked about the memory impact being greater on the second half for PS margins. But with the mitigation actions you're taking, do you sort of get to a point where you have confidence about seeing more stable PS margins as you exit the year and potentially some recovery towards the longer-term range? Like how would that trajectory look like in the back half? And sort of any confidence that it looks like a more stable trajectory sort of exiting the year on your front?

Yes. Thanks for that question. Clearly, the environment is fluid. At this point, we do say that we expect our margins for the rest of the year to be below our long-term range. That said, we are not changing our long-term guidance range for our margins, and we do expect to be back into those long-term ranges over time. We will see how quickly we can do it. Obviously, we're going to do it as quickly as we can, but the environment just remains very fluid.

Our next question comes from the line of Wamsi Mohan with Bank of America.

First a clarification, can you just tell us, maybe, Karen, like what you experienced in actual memory pricing impact that you realized in the quarter? Because it sounds like you're saying you're going to see a sequential 100% increase next quarter and it still is going to go up. And yet for the full year, it's going to be up 100%. So I just want to understand like what you actually experienced in the quarter itself in terms of memory price inflation?

Yes. The current prices that are up 100% sequentially are more looking forward. We did have some memory cost increases in Q1, but it was roughly in line with what we had outlined at the beginning of the year. The increases are more going forward.

Right. Okay. And for the full year, you're saying that your expectation is for a 100% year-over-year increase, if I understood that right.

No. We said we're seeing current prices up about 100% sequentially. And that's so Q1 to Q2. We do expect them to further increase in the latter part of the year. We'll see how much they increase, but we don't expect to have reached peak by the time we're in Q1 to Q2.

Okay. Okay. And then can you maybe just talk a little bit about the memory negotiations you're having with your suppliers? I want to go back to Krish's question on these LTAs. Is that all volume commitments and pricing negotiations still open? And has the frequency of those price negotiations changed at all for you? And is there any chance of being short supply at all as you go through the course of the year?

No. At this point, we have strong relationships with our long-term suppliers, and we have been collaborating effectively with them. As we assess pricing with our suppliers, we aim to secure it on a rolling basis to help shape demand and consider our pricing strategy accordingly.

Our next question will come from the line of David Vogt with UBS.

I might have missed this because I jumped on late. Karen or anyone, can you guys talk to the nature of your long-term agreements? And what I mean by that is obviously, I would assume it covers volume and price. But more importantly, I think you mentioned qualifying new suppliers. Can you expand on what that potentially means? Is that local sourced memory in China or in APAC? And how does that factor into sort of your kind of strategy going forward? Is that a permanent source of supply do you think is likely? And then I have a follow-up.

Yes, David, I'm happy to start and have Ketan chime in. We are pleased that we have secured the supply we believe we need to execute our plans for the rest of the year. We have strong relationships with our suppliers and have been adding new ones to our network. On the pricing side, we continuously monitor prices with our suppliers and lock them in as soon as we can to help shape demand and focus our pricing strategy. Ketan, feel free to add.

Yes. All these new suppliers, as we look at various supplier ecosystems, we are also accelerating our engineering efforts to qualify these commodities across our different platforms. Depending on the regulatory and compliance needs of specific countries wherever we are able to ship specific commodities, those are getting qualified in different products across the world so that we can maximize available supply in the market and create a system to be shipped out to a customer.

No, that's helpful. Just as a quick follow-up, could you discuss your pricing strategy? The industry has generally seen stable pricing, whether through the channel or distributors. Are you adjusting those windows to align better with the commodity prices you are procuring? How is this working in the marketplace, and what feedback are your channel partners providing regarding your pricing dynamics to better align your supply with market trends?

Ketan, feel free to take that one.

Yes, I'll take that. Pricing is, of course, a big topic in this environment. But remember, as we have several route-to-market options which we deal with including online business we have, the channel business, enterprise business, public sector, end-user deals and also a lot of contractual business. Each one of them has different durations, which we work on in terms of how the pricing will fully reflect depending on the type of the business with some of the RTMs, which I called out. So times can change from immediately in some cases through these various route-to-market options, and it takes a few months in other cases. That's how the pricing is getting worked out right now. As soon as we get the pricing information, we apply this across the board through this different RTM, as I called out. More importantly, where we are working on pricing is we want to be also sensitive about demand elasticity and working with customers in order to find the optimal configuration both of the right platform offering as well as some decontenting required in order to hit specific budgetary needs of specific customers. We are also driving this through a right level of intelligence using our workforce experience platform management software, which actually gives user insights in terms of what ideal configuration is for a particular work use case so that we can demand shape to that specific need and drive pricing accordingly. We're ensuring that we do not press on that specific cost increase on the memory, but overall system increase will be limited because of some of these actions, which I called out.

Our next question will come from the line of Amit Daryanani with Evercore ISI.

I have two as well. I guess, maybe, Karen, to start with on the free cash flow generation target of the $2.8 billion to $3 billion. Can you just walk us through how you sort of get that especially in the back half of the year? Because historically, I think free cash flow tends to be back half heavy, but then your profits tend to be back half heavy too. This time, it looks like profits might be front half heavy. So just walk us through like what are the puts and takes and what enables the free cash flow expansion this year, especially given the trajectory of net income.

Yes. Thanks for the question. You're right that our free cash flow is back-half loaded. That said, we delivered a better-than-anticipated free cash flow just in the first quarter. As we drive expectations for Q2, we should see decent free cash flow in Q2 as well. For the full year, keep in mind that we're driving greater growth from our PS business through the year, and that has a negative cash conversion cycle. Clearly helps us when we think about working capital. While we do have some increased inventory even in this quarter, you saw the cash conversion cycle improved while we had increased inventory, and that was really offset by the increased PS growth.

Got it. That is super helpful. And then maybe I'll stay away from memory and ask you a question on the print side. You folks talked about print margins kind of going towards the higher end of your ranges, I assume kind of in the high end, in the 19% range for the year. Can you just talk about like what are the levers that enable print margins to expand from here, especially if you continue to have some of the supply segment? So just spend a little bit of time on print margins and what enables that growth over there. That would be helpful.

Yes. Thanks for the question. You've seen us operate at the high end of our long-term range in print quite a bit lately. This is not new to us; it's something that we'll continue to do and drive. With our print strategy, we're clearly focused on profitable growth, and that includes shifting our business model to profit upfront with Big Tanks and also driving increased subscriptions. You've seen us do that over the last several quarters. We're also focused on gaining share in high-value categories. And of course, we're always focused on reducing our cost structure to remain competitive. We'll be pulling all of those levers to drive stronger PS margins.

Our next question will come from the line of Ananda Baruah with Loop Capital.

I guess what if I could then maybe a follow-up, but would just love to get any context that you guys can share on the CEO search, what types of folks you're looking for and what the process is looking like? I appreciate it. I have a quick follow-up as well.

Thanks for the question. A few things on the CEO search. First, we've already established a search committee, and we are in the market, and that's been going on for the last three weeks or so. I think, in general, the Board is looking for a CEO that can take HP to the next level of our strategy, maybe a little more specific areas that we're oriented to. First, the individual that's had a proven track record of delivering value for shareholders and customers. Second is, as evidenced by this conversation, being able to navigate through a complex and dynamic environment. Lastly, to be focused and be able to have global and multisegment business experience. As we think about the CEO, we believe that being able to deliver value, be able to deal with the complexity of the marketplace and at the same time have the expansion and scale that HP deserves.

I appreciate that. And so that includes folks outside of the PC and print industry?

Yes. I would say that the Board is having a very broad view of that as a result of both multiple businesses that HP is in addition to strategy. And in addition, as I mentioned, just the scale of the organization.

That's super helpful. Just a quick clarification as a follow-up. You mentioned that 35% of the BOM for fiscal '26 is now anticipated to be memory, up from the typical 15% to 18%. Is my understanding correct that your PS GP dollars consist of 1/3 peripherals and 2/3 the PC cost? I have two questions: first, am I remembering that accurately? Second, if yes, is the 35% referring to 35% of the 2/3 that is the PC BOM, or is it 35% of the entire GP dollar amount?

Yes. It's 35% of the PC BOM. So hopefully, that clarifies. Yes, we do have we do have 1/3 of our PS margins that come from businesses not reliant on memory. Those include higher-margin attached businesses, our Workforce Solutions and hybrid systems. I would say, particularly in the attached business, we have a lot of headroom for higher margin growth from our installed base, and we're keenly focused on driving these more as part of our future work strategy.

Our next question will come from the line of Katherine Murphy with Goldman Sachs.

You noted that you're working to make sure that the overall systems price increase for PCs are limited, but obviously, we'll see some ASP uplift from the function of mix shift in the portfolio to more AI PCs and premium devices. Thinking just about the like-for-like increase on systems, do you have a framework for how much of a price increase customers can digest before we start to see impact on demand? And then I have a quick follow-up as well.

Yes, I'll start, Katherine, and then I'll ask Ketan to chime in. We are increasing prices currently. So yes, our ASP uplift is through mix and higher-margin things, but it's also through price increases that we have been driving. So Ketan, I'll let you comment on those.

Yes. And the demand to price elasticity is a constant thing which we observed by customer use case and customer type. That's something which we'll keep adjusting to ensure that we are hitting specific demand equation. I think there are two tailwinds, which we are most encouraged by. We've spoken about this, which is Windows 11 and AI PCs, but more importantly, they are giving us a lot of confidence that the demand will continue. Productivity gains and seamless collaboration across different use cases in enterprises are showing strong data points. That is encouraging. The second is also reliable security, which is important right now to secure devices and to handle AI-driven cybersecurity threats is equally valued by customers. Now on top of it, AI PCs have started showing that the local models on AI PCs are delivering results with more and more ISVs developing applications that are using locally and more effectively than ever before. HP has tied up with more than 100 ISVs to drive this forward. What I mean by this is looking at the overall equation when it comes to pricing, there is a total cost of ownership focus we are going after and making sure that depending on the use case, how much cost savings will come to each customer's situation across various application layers. That is the key driver of how the pricing equation will work.

As a follow-up, can you talk about any correlation that you observed between demand in the PC market and the opportunity in peripherals or print? Should we expect any weakness in PC industry unit shipments to weigh on the attach of monitors, keyboard, headsets, etc.?

Historically, we have seen that post-refresh cycles in 2025, when the Windows refresh started, the attachment of our peripherals business follows very well because a lot of budgetary needs in the previous years have been used for PC buying. That also is a huge opportunity in terms of how we see the demand equation coming along as peripherals need increase. On top of it, as HP, we have significant room for growth in terms of gaining share in this category. That will drive growth in attaching peripherals for us.

Our next question will come from the line of Asiya Merchant with Citigroup.

I heard a lot about share gains. Where does HP feel very confident in those gains, perhaps in certain segments or regions? Specifically, I am referring to PCs, but please feel free to elaborate on print as well. Additionally, regarding OpEx, it seems like some of the cost-saving actions announced last quarter are reflected in the first quarter results. How should we view OpEx for the rest of the year?

Yes. I'm happy to take share gains and ask Ketan to comment particularly on PS. I'll take print. I'll let you take PS, Ketan, and then I'll take the OpEx question. We have been gaining share in print, in Big Tanks in developed markets. We've also been gaining share in supplies, and we continue to be the #1 leader in print with 33.5% of global market share. We're also focused on regaining share in high-value office categories, and we've been driving product innovation along with continued cost reduction to remain competitive to help us regain some of that share. Ketan?

From a Personal Systems standpoint, in calendar quarter four, value share which we gained was across all key geographies in all three regions. That is very encouraging and that gives us confidence to take it forward. We are not gaining share for share's sake; we want to drive our strategy, and that's shown in our CQ4 performance. Premium share, where we were up 1.6 points year-on-year, and AI PC share, which was up 1.8 points year-on-year. We drive strong growth in areas that are identified and will continue to focus and prioritize these categories in this demand-supply equation environment to remain true to our strategy.

On OpEx, we've said that we expect OpEx for FY '26 to be roughly flat year-over-year in dollars. That means that we're very focused on driving expense reductions everywhere that we can to offset the important investments that we need to make. As you know, last quarter, we announced a transformation program centered around AI enablement, where we expect to deliver $1 billion in gross run rate savings by FY '28, with $300 million by the end of FY '26. Right now, we're focused on accelerating that program where we can and intending to drive additional cost actions to help mitigate the increasing headwinds that we're facing.

And our final question will come from the line of Aaron Rakers with Wells Fargo.

Yes. I guess the first question, and I can appreciate there's a lot of volatility going on in the market right now. But I believe last quarter, you had alluded to like a $0.30 headwind for memory component costs. I think, again, at that point, it was 15% to 18% of the PC bill of material. I guess what I'm asking is the guidance at the low end of the $2.90 to $3.20 range. Clearly, these memory input costs have gone up dramatically. Any way to frame the current views on that $0.30 headwind or how that's evolved or changed relative to the current updated guidance that you've given?

Yes. Thanks for the question, Aaron. Obviously, memory costs are higher now. At this point, we're not going to continue trying to quantify given the volatility and the myriad of mitigation actions that we're working. We are focused on mitigating as much as possible. Obviously, we've included that current assessment into our outlook.

Okay. As a quick follow-up, I apologize if this is a naive question, but when you discuss seasonality and being above seasonality, I'm curious how you would characterize or define normal seasonality in the fiscal second quarter for PCs and the print business.

Yes. Regarding PS revenue, which we anticipate will exceed seasonal expectations, we plan to capture more market share in premium categories and AI PCs, and we expect to see increased contributions from our peripherals and solutions business, which are less affected by memory costs. The Windows 11 refresh continues to drive sales outside of the U.S. We are also implementing price increases to counteract the rising impact of memory costs. Overall, we expect our PS revenue to be stronger than usual in the second quarter. While we do anticipate growth in the latter half, we also expect it to moderate.

This concludes our question-and-answer session. I'll hand the call back over to Bruce Broussard for any closing comments.

Thank you, operator. Thank you all for joining us today. As we've talked about today, HP has an enormous opportunity ahead. We're managing through the headwinds that the industry is facing, leveraging our disciplined execution and mitigation actions while capitalizing on HP's DNA of innovation. We plan to provide more color on this in the coming quarters. I'm confident that our Future of Work strategy puts us on the path to growth in 2026 and beyond, and I look forward to keeping you updated on our progress. Have a great afternoon. Thank you.

This concludes today's call. Thank you all for joining. You may now disconnect.