Joe Cardoso

Joe Cardoso asked about HP's conviction regarding PC momentum into 2026, particularly as the bulk of the Windows 11 refresh cycles past, and noted that pricing seemed to be a bigger contributor than units for next year. He also inquired about expected seasonality for the upcoming year, considering tariffs, Windows 11, and dynamic memory pricing, and any specific revenue or margin dynamics for the first half versus the second half.

Answer

CEO Enrique Lores expressed conviction based on an aged PC installed base, the remaining 40% Windows 11 conversion opportunity (especially in SMB, Europe, and Asia), and the improving mix of AI PCs. He highlighted the strategy to focus on premium categories, peripherals, and services to drive revenue growth faster than unit growth. CFO Karen Parkhill anticipated stronger second-half revenue due to normal seasonality and pricing. She noted print operating margins would follow typical seasonality, while Personal Systems operating profit rate would be 5-6% in the first half, potentially dipping below 5% in Q3/Q4 due to higher memory costs in the back half, leading to a more evenly weighted EPS throughout the year.

Joe Cardoso asked about HP's conviction regarding Personal Systems (PC) momentum into 2026, particularly as the Windows 11 refresh cycles past its bulk, and the dynamic where pricing is expected to be a larger contributor to growth than units. He also requested insights into the expected seasonality for next year, considering tariffs, Windows 11 refresh, and the dynamic memory pricing environment, specifically regarding first-half versus second-half revenue and margin implications.

Answer

Enrique Lores, CEO, expressed conviction based on an aged PC installed base, the remaining 40% of Windows 11 refresh (especially in SMB and outside North America), and accelerating AI PC adoption (over 30% of shipments this quarter). He noted HP's strategy to focus on premium categories and increase attach rates for peripherals and services, driving revenue growth faster than unit growth. Karen Parkhill, CFO, anticipated stronger revenue in the second half due to normal seasonality and pricing actions. She projected Print operating margins to align with seasonality (Q3 typically lower) and PS operating margins to be 5-6% in H1, potentially dipping below 5% in Q3/Q4 due to memory costs. She also noted EPS might be more evenly weighted throughout the year due to the H2 memory impact. Mr. Lores added that the major memory cost impact is expected in the second half, with almost no impact in the first half due to existing inventory.

Joe Cardoso of JPMorgan Chase & Co. asked for quantification of the China tariff impact in guidance, details on supply chain shifts, and a ranking of the drivers for the upgraded Personal Systems (PS) growth outlook.

Answer

CFO Karen Parkhill stated that current tariffs are factored into guidance but would not be quantified, noting mitigation through HP's global supply network and cost reductions. CEO Enrique Lores added that HP has built a more resilient supply chain in Southeast Asia and other regions. For PS growth, Lores identified the aging installed base, the Windows 11 refresh, and AI PC adoption as key market drivers, with HP's own innovation and focus on premium segments fueling its outperformance.

Joe Cardoso inquired about the headroom for Optical Communications margins to continue improving, considering the demand pipeline, product mix, and future capacity additions. He also asked about the margin trajectory for the Hemlock (solar) business, the timing of its recovery to prior levels, and the influence of tax credits and subsidies.

Answer

Chairman and Chief Executive Officer Wendell Weeks stated that Optical Communications margin improvement is linked to the value created by innovations and robust growth. Executive Vice President and Chief Financial Officer Ed Schlesinger added that ongoing capacity additions and reduced ramp costs will further enhance margins. For solar, Ed Schlesinger outlined a goal of a $2.5 billion business with margins at or above Corning's overall level, expecting incremental improvements. Wendell Weeks advised waiting until after Q1 for more specific guidance on the factory ramp, given the current focus on scaling wafer production.

Joe Cardoso of JPMorgan Chase & Co., asking on behalf of Samik Chatterjee, requested more detail on the potential upgrade to Corning's 'Springboard' plan and the remaining risks or milestones needed to achieve the full non-risk-adjusted targets.

Answer

Chairman and CEO Wendell Weeks confirmed that the upgraded plan's target would land between the current $3 billion high-confidence plan and the $8 billion non-risk-adjusted plan. He framed remaining challenges as 'milestones' rather than 'risks,' highlighting the need for continued recovery in the carrier business, progress in solar, adoption of new mobile consumer electronics innovations, and hitting key targets in automotive glass.