PC manufacturer HP Inc. (HPQ.US) has issued a profit forecast for the current quarter indicating that the company continues to grapple with challenges stemming from the sharp increase in memory chip prices. HP anticipates adjusted earnings per share (EPS) for the quarter ending in July to be between $0.61 and $0.71. While the midpoint of this range, $0.66, exceeds the average analyst estimate, data shows some analysts had projected figures as high as $0.73.

For the second quarter, HP reported EPS of $0.86, surpassing market expectations, with revenue reaching $14.4 billion, a year-over-year increase of 9.2%. Analysts, on average, had expected adjusted EPS of $0.71 on revenue of $14.0 billion. The company reported an adjusted operating margin of 7.5%, compared to an average expectation of 6.6%.

Revenue from HP's Personal Systems business, its computer division, grew by 13% to $10.2 billion. This growth was primarily driven by a 14% surge in commercial PC sales. HP is benefiting from customers replacing equipment and investing in new systems to align with the artificial intelligence trend. However, the demand for AI has also contributed to a shortage of memory chips, leading to rapidly rising costs.

In response, HP has raised product prices, diversified its supplier base, and modified certain products to reduce reliance on memory. Interim CEO Bruce Broussard noted that memory and storage costs increased during the quarter, and the company expects these prices to continue rising in the second half of the year. During the post-earnings conference call, he stated that while HP is executing a plan to "align supply, demand, and product configuration decisions," the company anticipates "the memory and storage environment will remain tight."

HP also revised downward the upper end of its full-year adjusted profit forecast by $0.10. The current projected EPS range is now $2.90 to $3.10, compared to a previous range of $2.90 to $3.20 provided in February.

In after-hours trading, the stock initially surged by as much as 15% before giving up nearly all of those gains. The stock closed in New York at $25.49 and has risen 14% year-to-date.

Analyst Woo Jin Ho commented, "Double-digit growth in PC pricing has helped boost the division's performance and profits, but the slight narrowing of the full-year EPS guidance suggests some PC sales were pulled forward. This could be one factor contributing to the weaker EPS expectations for the fourth quarter."

Company executives mentioned on the call that some customers purchased more products than usual to hedge against future price increases, contributing an additional 2% to 3% to revenue for the quarter. HP is also currently searching for a new CEO following the appointment of its former CEO, Enrique Lores, as the CEO of PayPal. Board member Bruce Broussard is serving as the interim leader during the search for a successor.