HP Inc. (HPQ) is drawing cautious sentiment from analysts amid a 12% year-over-year increase in memory component costs, threatening to erode profitability in its PC and printer segments. The upward cost trend, driven by global supply constraints and semiconductor demand, is expected to impact Q4 and early 2026 earnings.
- DRAM and NAND flash prices rose 12% YoY in Q3 2025
- HPQ’s gross margin fell to 34.7% in Q3 2025, down from 36.1% in Q3 2024
- Memory costs represent 18%-22% of bill-of-materials in HP’s high-end product lines
- Printer division operating income declined 4.5% in Q3 2025
- Analyst ratings: 16 of 24 firms rate HPQ as neutral or underperform
- Potential gross margin compression of 300–400 basis points in Q4 2025 if trends continue
HP Inc. (HPQ) is navigating heightened uncertainty as rising memory costs begin to weigh on its financial outlook. Industry data indicates that DRAM and NAND flash prices increased by 12% year-over-year in the third quarter of 2025, driven by constrained production capacity and elevated demand from AI-driven infrastructure and consumer electronics. These input cost pressures are particularly acute for HP’s high-performance workstations and enterprise-focused laptops, where memory typically accounts for 18% to 22% of total bill-of-materials expenses. Analysts note that despite HPQ’s continued revenue growth of 5.3% in Q3 2025—reaching $18.2 billion—gross margins contracted to 34.7%, down from 36.1% in the same period last year. This deterioration reflects the company’s limited ability to fully pass through cost increases to consumers amid a still-soft global PC market, where demand grew only 1.4% year-over-year. The company’s printer division, which relies on memory for embedded firmware and connectivity modules, also saw a 4.5% decline in operating income. Market participants are closely monitoring HPQ’s guidance for the fourth quarter. Management has not issued a formal outlook, but internal forecasts suggest a potential 300 to 400 basis point further compression in gross margins if current memory prices persist. This could translate to a 7% to 10% reduction in operating income, depending on pricing elasticity and inventory revaluation impacts. The cautious stance is reflected in equity ratings, with 16 out of 24 analyst firms maintaining a “neutral” or “underperform” rating on HPQ. Investors are now factoring in longer-term risks, including potential shifts in semiconductor supply chains and the impact of geopolitical tensions on key Asian manufacturing hubs. While HPQ continues to invest in automation and component diversification, these measures are expected to yield limited relief before mid-2026.