HP (HPQ) may cut its fiscal 2026 outlook as rising memory costs and weaker margins on personal computers weigh on results, BofA Securities said Tuesday in a report.

Management reaffirmed its fiscal 2026 EPS and free cash flow guidance while striking a cautious tone, with PC margins expected to remain below the long-term 5% to 7% range for the rest of the year, BofA said. Memory costs have doubled from the 40% to 50% increase assumed in initial guidance, the report said.

BofA raised its fiscal 2026 estimates to EPS of $2.83 on revenue of $56.9 billion, citing stronger pricing and better printer margins, while trimming its 2027 EPS forecast.

PC revenue in Q1 rose 11% from a year earlier on demand pulled forward ahead of price increases, while margins were 5% on a weaker mix and higher component costs, the report said. BofA expects double-digit PC unit declines this year, partly offset by pricing and mix improvements.

The printer segment remained a relative bright spot, with Q1 operating margins at 18.3% and expected to track toward the high end of the 16% to 19% long-term range in Q2 and Q4, supported by pricing actions and cost discipline.

BofA lowered its price target on HP stock to $16 from $18 and maintained its underperform rating.

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