Right here? Yep. You're perfect. All right. Good morning, everyone. Thank you for joining us day one here of the 2026 Morgan Stanley TMT conference. My name is Erik Woodring. I lead the hardware research coverage based out of New York. Quickly, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, reach out to your Morgan Stanley sales rep. From the HPQ side, today's discussion includes forward-looking statements that involve risks, uncertainties and assumptions, which are further described in HP's SEC filings, including HP Form 10-K and 10-Q. HP assumes no obligation and does not intend to update any such forward-looking statements. For more information, please see HP's investor relations website at investor.hp.com. I'm pleased to be joined this morning by HPQ CFO, Karen Parkhill, first time at our conference, joined in August 2024, has a ton of CFO experience, most recently at Medtronic. Obviously thank you for joining us today. Thank you, Erik. Thrilled to be here. Awesome. I think it's probably the easiest place to start is just a quick look back on your January quarter, and what you announced at earnings last week. Maybe just give us a quick postmortem and kind of how that bleeds into what you're looking at for 2026. Yeah. Looking back. Yeah. No, thanks for that. You know, we had a really strong Q1, and we're pleased with our performance in the quarter. We delivered 7% revenue growth and EPS at the high end of our, of our guidance range. Amidst that, we gained share, aligned with our strategy in the key areas that we're focused on, in PS and high-value segments and in consumer. In print, we gained share in Big Tank and developed markets and in supplies. We are really pleased with our performance. We did give an update to our outlook on our earnings call as well. Obviously we're dealing with the situation of the supply environment for memory and the significantly increasing costs. You know, with our, with our guide for the year, we talked about about that memory situation. We talked about the fact that we're driving, you know, strong mitigation playbook against that. We also talked about the fact that we're pleased to be delivering higher than typical revenue growth in the first half, and that we now expect our print operating margins to be at the high end of the range. When we take all that together with our guide, we said that we're taking a prudent approach and expecting our revenue growth to moderate a bit in the back half. With all of that put together, that we expect at this stage, under these current assumptions, that our EPS will more likely be at the lower end of our annual range that we had provided. That's a good starting point, and maybe I want to touch on that because there's so many uncertainties and unknowns in the world, demand, costs. Can you just talk about how you think forward and factor those into your guidance today, knowing that there are things in the second half of the year that you might not even know about. Yeah. T oday. How do you discount that in this updated guidance year? obviously the environment that we're operating remains fluid, and particularly against the memory situations and to some extent against tariffs too. You know, what gives us confident in where we are right now is that we've got a strong mitigation playbook that we are executing. You know, against that playbook, we're securing supply in memory. We are helping our customers and shaping the demand and product configurations around the supply that we have. We're reducing costs everywhere that we can, not just in our PS business, but across our entire company. We're increasing prices. You know, that's a playbook that we know how to do, and that gives us confidence in where we are. Okay. Before we maybe dig further into that, can we just maybe touch on the CEO search? I'd love to just maybe get your thoughts on how we think about a permanent replacement. In the meantime, what role does Bruce play as interim CEO, and kind of what are the characteristics or qualities that you're looking for as someone to replace Bruce more permanently? Yeah. Thanks for the question, Erik. Obviously, Bruce Broussard has stepped down from our board to serve as interim CEO, and he's really providing continuity and stability and enabling us to continue to drive forward momentum in this time. You know, he's a seasoned CEO, and he's bringing really good insights that are helping us and accretive to the strong leadership team that we've got right now. He's also quite familiar with HP because he served on our board for a while. He's familiar not just with the leadership team, but also with our strategy because he helped build that strategy. I'd say things are really on course at this stage with Bruce stepping in. In terms of the CEO search, the board is really taking a thoughtful approach to this and looking at a wide range of candidates, but really focused on a leader that is proven and successful at leading and driving large global complex multi-segment businesses at scale. Okay. perfect. I unfortunately, I think we have to start with the memory questions just to get them out of the way, then we can turn to some more company-specific questions. You know, maybe just to start, how do you ensure in this kind of crazy world right now, you have access to all the memory supply you need? Obviously, if you talk to memory guys, they'll say there isn't enough to go around. You talked about that you do have LTAs in place, you've qualified low-cost suppliers, as you mentioned. Is that enough? Or what are you doing? Maybe the question is, what are you doing to ensure there's no supply disruption or issues? Yeah. Again, we're tested in these kind of situations. You know, when it comes to memory, we have been focused on using the long-term relationships that we've got, and we've got them with all the major suppliers, and nurturing those relationships to help ensure that we've got the supply that we need. We've also qualified new suppliers, you mentioned that. And we've taken on, strategically taken on inventory for, you know, key platforms. You know, when you bake all of this together, we're confident that we've got the supply that we need to execute our plans this year. Okay. Then maybe as a follow-up, touching on the price side of things, you outline kind of how you're thinking about the bill of materials or at least the percentage of bill of materials that memory would represent this year on the PC side. You know, you're kind of saying, like, it doubles as a percentage of the bill of materials. Is that enough? Or maybe why not assume maybe a more significant pricing increase just given the fact that memory is up a lot, there's a lot of unknowns in the second half. Just help us understand, maybe the counter to that, what I'm alluding to in that question. We have said in our outlook that we've got memory doubling sequentially from our Q1 to our Q2, and that we expect the cost of memory to increase even further sequentially from there. But against that, we're focused on, you know, strong mitigation playbook of shaping demand and product configurations around the supply of taking cost actions, again, everywhere that we can, not just in the business, but across the company, and of increasing pricing. You know, when you take all that together, you know, we expect unit demand decline, particularly in the back half, but we still expect some revenue growth as we focus on increasing prices and on driving share gain and on driving attach of non-memory affected businesses. Let's dig into that. That's a perfect segue, which is that you're guiding to Personal Systems, kind of backing into a kind of mid-single digit plus revenue growth this year. Just walk us through the assumptions and kind of what you guys have to do to get to that point in terms of share gains and pricing, demand elasticity. Just what are the building blocks that help us arrive at mid-single digit plus growth? Yeah. Yeah. I'd start with, yes, we expect the mid-single digit revenue dollar growth. Right. Against that, you know, we are aligned with industry experts out there calling for a high single-digit to low-teens decline in units in the calendar year. That translates and implies a low double-digit to mid-teens decline for us in our back half of our fiscal year. Against that, again, we're driving increased pricing to help offset the headwinds. We're focused on driving share gain, particularly in areas that are aligned with our strategy in commercial and premium categories in attach. We're driving. We've got a significant opportunity to drive more and more attach against our installed base. That attach is, you know, the peripherals, the docks, the displays, the services that we can drive for our customers. We're keenly focused on driving that as well. Okay. Last high-level question, then we'll get more into PCs, more into print, capital allocation, et cetera. On print, I think there's, you know, some memory exposure there. There's not nearly as much as in the Personal Systems business. How do you account for that? Is that an issue in the print business? Just if we kind of focus on print, not relative to PC. You know, it's a tiny issue. Okay. Within print, there's not DRAM memory in print. There's other legacy memory like DDR1 and DDR3 that are very different suppliers for that memory. It's a very small impact in print, and it's obviously embedded in our outlook. Cool. Let's move beyond that. Let's dig further into the PC business or Personal Systems. You touched that there's a little pull forward in the January quarter, but you've also highlighted that Windows 11 upgrades are, I think you said 60%, kind of complete. You're still very bullish on AI PCs and what that means for PC growth. You know, while there are headwinds for memory, you know, you're also alluding to plenty of important tailwinds. How do you kinda combine those two into your updated outlook? What, what are we assuming from a refresh standpoint? Are AI PCs kind of accelerating replacement cycles? Are they an ASP driver? Just the building blocks of some of those tailwinds. Yeah. Thanks for that question. You're right, Erik. We did see some pull forward, moderate pull forward in our Q1, and it was mainly in our consumer area. You know, when it comes to Windows 11 refresh, we have said that we believe that about 60% of the refresh is complete at this point, and that means there's roughly 40% to go, and most of that is in Europe and Asia and across small and medium businesses. So we're gonna be continuing to drive that refresh in those areas. You saw us drive better growth in those areas this past quarter, just given the fact that that refresh is continuing. On AI PCs, we are continuing to drive and see a higher penetration of AI PCs as part of our shipments. This past quarter, 35% of our shipments were AI PCs. That was up from 30% the prior quarter and up from 25% the quarter prior to that. We see AI PCs continuing to be a bigger part of that mix going forward. All of that is built in, I would say all of that is built in, again, under the assumptions too that we're gonna see the unit decline, particularly in the back half that I talked about already. Okay. Then, you know, maybe one of the most maybe misunderstood, in my belief, parts of the Personal Systems business is a third of that is non-PC. It's related to PCs, but it is workforce solutions, PC peripherals, attach video, et cetera. If we were just to kinda take that business in aggregate, what is the kinda growth/margin profile of it? We've historically put that into kind of a growth bucket. Mm-hmm. It's kind of important to highlight that as an offset to the concerns that could exist in the PC market. Maybe just help us frame what this business grows, how profitable is it, maybe even just relative to traditional PCs, and the maybe headwinds, tailwinds you face in that part of Personal Systems? You're right. Roughly, a third of our PS growth margins are related to these businesses that don't have much memory component in them. They are hybrid, they are peripherals, gaming peripherals, services, workforce solutions. We are purposely driving that and have, you know, a great opportunity, I think to do that, like I mentioned. Those businesses we do expect to grow decently and, they are attractive businesses with higher margins. As a follow-up to that, because we've tracked the peripheral space for so long, you made an important hire last year. You hired Logitech's former COO to become your kinda Chief Strategy and Information Transformation Officer. When I see that, it feels like it signals maybe a bit of a more concerted effort to go after that market. Obviously, there are significant margin that you could capture in that market. Am I looking too much into that? If yes, help me understand why. If not, if I'm not looking too much into it, maybe just talk about why now is the time to disrupt that peripherals market. Yeah. Thanks for the question. I would say Prakash has been a great addition to our leadership team, and yes, he is driving a strategy and transformation for the company. As it relates to peripherals, our focus on peripherals is really about tying to our strategy. It's about driving our future of work strategy with better together experiences across our devices, software, services, and creating an integrated platform that helps our customers get work done easier. It's also about driving higher attach, particularly in this environment like I talked about. It's not necessarily about just going after disruption in a single category. Okay. It's all tied to our broader strategy. Okay. Maybe last PC question is, when we think about all these moving pieces, especially with memory and the challenges that much higher prices could bring to demand, is the focus we want to maximize growth and gross profit dollar growth or operating income growth? Is the message we wanna protect margins? Like, what is the main priority for HPQ in the Personal Systems business amidst all of these kind of headwinds and tailwinds right now? Yeah. Clearly, in the near term environment, when we're dealing with the memory cost challenges, our, you know, our focus is on offsetting those challenges, particularly on a dollar basis. Those challenges can have an impact on our margins because we're working as we price to offset the net impact of the headwinds on a dollar basis. On a rate margin, that can have, you know, a slight negative impact. Over the long term, our target ranges for our operating margins in our PS business of 5%-7% has not changed. Okay. Our focus and goal will be to get back to those ranges as quickly as possible. Okay. Let's shift to print. You know, just maybe at a high level, what are you hearing from customers amidst, again, everything that's going on in a tech budget, AI, PCs, et cetera? What are you hearing as it relates to print demand spend? How is that changing? Right now, we have seen IT leaders and CIOs prioritize other things outside of print in the moment. We have seen a decline, the rate of decline improve actually in print. We've seen stable usage patterns, and this is important across businesses. Those stable usage patterns, we think, are really aligned to the return-to-office trends that are happening. We're encouraged that at some point we'll see some uptake in print, particularly in office print. Okay. On the point of competition, I don't wanna take the focus away from HPQ, but a lot of your competitors are based in Japan. Historically they've used pricing as kind of a lever to get more aggressive in the market to try to go after share. You've talked about raising prices partially, and as a response to tariffs. Mm-hmm. What are the opportunities and risks as you think about this competitive environment and what your competitors are maybe trying to do to come after the leading print vendor in the world right now? Yeah. Hard for me to talk about our competitors. I don't know exactly what their, you know, focus is, but I would say what we're focused is on being disciplined. You've seen our print operating margins be at the high end of our range for a while, and that's due to our strategy and discipline. You know, in some cases when our competitors, particularly with the increased cost of tariffs, are not necessarily increasing pricing like we have been doing, in some cases, we are ceding a little bit of share, but that's because we're being disciplined. Right. You know, we're still the market leader in print. We still have 33.5% share, and we're gonna remain disciplined in that environment. I wanna ask The question that I asked you on Personal Systems about the non-PC business. I wanna ask a similar question about print, which is there are alternative ways to buy printers other than just the historical transaction. There's an office print market, there's industrial, there's 3D, there's Big Tank, big ink. I can go on, but the point is it's not necessarily as straightforward as just P x Q as people might think. Where are those opportunities outside of what people might think about as core print to offset challenges from a demand side, but also drive that margin rate upside that you just alluded to? Yeah. Thanks for that question, Erik. We've been driving a really concerted strategy around print, and it's around focusing on placing profitable units out there, long-term profitable units, but it's also about driving more profit up front with Big Tank unit placement. That's something that we're amping up a lot starting this fiscal year, and we're putting increased marketing dollars behind it. We're also driving a greater focus on subscriptions with our All-In Plan, which includes printer, paper, I mean, printer, paper, and ink. You know, we're focused on driving cost reduction everywhere that we can across print. That's helping us maintain our margins along with these other strategies. We've got some bright spots in print too. You know, you mentioned industrial. That is a place where we've grown for 10 consecutive quarters. It's got strong supplies and attach to it. You know, we're continuing to drive that along with the trend of the move from analog to digital printing. Mm-hmm ... in that business. Okay. Last question on print before we maybe turn to the CFO side of the world, so to speak, is for the better part of five years, your print operating margins have been, you know, solidly at the high end of that 16%-19% range. Doesn't matter the demand environment, you've been in 18%-19%. You've kept that long-term target range at 16%-19%. Is there conservatism in that 16%-19%? Or maybe what I'm trying to ask is 18%-19% print operating margins the new normal? Or why would we then see margins maybe fall below that range if you've been able to hold them through effectively every type of environment you might be able to see? Yeah, no, I appreciate the question because absolutely you have seen us operate at the high end of that long-term range for a while now. We've said this fiscal year in particular, we intend to be at that high end of the range again, to help offset some of our headwinds in the PS business. We maintain that 16%-19% range really because there may be a time period or a quarter or two where we see an opportunity to place more long-term profitable units that are the right value creation-. Mm-hmm. May have a little bit of impact in that, in that time period. Okay. Right. Okay. Okay. That strategy hasn't necessarily changed. That's correct. Okay, cool. That's correct. All right. Let's move beyond PC print, move to kinda capital allocation, and whatnot. I wanna touch on free cash flow. I think it's incredibly important because PCs are kind of the cash conversion cycle driver, so to speak, but we're talking about some caution in the second half of the year. You're really not backing down from that free cash flow guide. Right? You brought it down maybe $100 million at earnings for this year. What are the offsets or what are the tools that you guys are leveraging to protect free cash flow in this kind of wild environment? Yeah. We recognize that free cash flow is super important. And it's, you know, a critical part of our capital allocation framework too. We're gonna be laser-focused on delivering that free cash flow. You know, as it relates to the cash conversion cycle around our PS business, while we do expect some unit decline, it's not the units that matter for free cash flow, it's the dollars that matter for free cash flow. We do expect that we'll still have some revenue growth really driven by our share gains, our pricing actions, the attach that we talked about, and that can have a benefit on free cash flow as well. Is there anything on the working capital side that we need to be aware of, that is maybe unique or differentiated or new to this year as you think about 2026 that, you know, hasn't necessarily happened in, in the past? Anything in terms of a balance? No, I would just say you've seen us be good stewards of working capital and, you know, we know how to do that, and that's just gonna continue. Okay. Obviously, we've got the little bit added benefit from the negative cash conversion on the PS business. Okay. All right. Perfect. Then I want to talk about reinvestment too, or maybe asked differently, what are the maybe key areas, not all of them, but key areas you're really trying to innovate in and maybe become more differentiated from your peers, whether that's in PC or print? When it comes to investment, it's really aligned with our strategy. In the PS side of the business, it's aligned with driving AI PCs and driving our better together strategy with the interconnectedness of all of our devices. That's where we're investing on the PS side. On the print side, we're investing in more AI enablement and secure printers. And, you know, in the nearer term, we're also investing in some marketing against our subscriptions and against Big Tanks in developed markets like we had talked about. Okay, cool. I want to talk about OpEx. That is a lever that you guys can use. You know, you announced a three-year cost reduction plan. I believe it was not last quarter, as in last week, but the prior quarter, the October quarter. It's really actually focused more on AI-driven initiatives, which obviously have been in the news plenty recently. Can you maybe just help us understand what you are actually doing internally to reduce costs or at least transform your cost base using AI? How much of a lever is OpEx for you to pull? In the event things get even crazier than where we are, you know, how much more can you lean into cost reduction, cost efficiency as a tool? Yep. Thanks, Erik. We did announce a billion-dollar AI-enabled cost savings program where we expect to drive that $1 billion by FY 2028 in gross annualized run rate. We also said that we expected to drive $300 million of it this fiscal year, and we expected to spend roughly $650 million for the program with $250 million of it this fiscal year. I would say with the current headwinds that we're facing, with the memory challenges, our focus is on accelerating that program everywhere that we can and also driving other cost actions and cost takeout that we can. As a result of that, you could see us spend a little bit more than $250 million this year to drive that. I would say, our estimated savings and expense for those savings are all included in our outlook. In terms of, in terms of the things that we're doing with AI enablement right now, it's things like having digital teammates help us with our channel partners to answer questions, to provide next steps. It's also embedding AI into our supply chain to automate order entry and sales return and how we handle our products through the supply chain. Okay, perfect. Maybe, maybe last question as we get close to wrapping up here, last question before we kind of do the wrap-up question is there an opportunity for consolidation in the printer Personal Systems market? I just say that because, you know, we can go back to pre-COVID. We remember what happened pre-COVID. It feels like there's a way, at least definitely in print, that maybe we could make the market healthier if there is consolidation. You guys are coming from the position of power. So just help us understand, is there an opportunity for consolidation in either market? You know, based on your answer, you know, how would that create more shareholder value at HP Inc.? Either yes or no, so to speak. Yeah. I would just say that we are a highly large global player, in both of our businesses in print and PS, and we believe that you do need that scale to compete effectively in these businesses. We like where we are right now. Okay. You know, we don't see need to change anything. You know, clearly in this environment, in particular, we're focused on, you know, clearly focused on driving the mitigation offsets that we've talked about for the challenges that we've got. Okay. I, it's compared to what you guys have to do, it's easy to write research about tariffs. You guys have to deal with them in real time, and obviously the landscape we can say is probably more than uncertain. Just after the Supreme Court decision a few weeks ago now, can you just give us a lay of the land of what's changing from a tariff exposure, tariff rate, tariff payment, tariff exemption perspective? Sure. I'm not sure I even know. Sure. Would love your feedback on where we stand and how that has changed. Yeah. Happy to talk about that. After the Supreme Court ruling, which took away the IEEPA tariffs and the fentanyl tariffs for us, these tariffs, by the way, are mostly in our print business. Right. Our PS business is largely exempt from these tariffs. That remains the case? Remains the case. Okay. Yes. The court took away those tariffs, but we're still dealing with Section 301 tariffs in our print business. The administration reacted by putting in place 15% tariffs across the board for 150 days. When you net all of that out, you know, based on what we know today and the policies in place today, there's a slight benefit that we've got that we're gonna obviously use to help us offset the other challenges that we've got across our businesses. Obviously, the environment remains very fluid. We've got a super strong team that is used to working in concert with the administration on these things. You know, if something changes, we'll continue to keep you posted. Okay, perfect. I wanna end with just giving you kind of the dance floor here and the final word. Really what I want you to focus on maybe to help us all is what maybe we don't fully appreciate, what maybe we don't fully understand about the HPQ story today that internally at HPQ you guys are extremely excited about? Yeah, thanks for the opportunity for that question. I would say, first of all, we are very used to operating in tough environments, and we've proven ourselves that we can not only, you know, deal with our environments, mitigate our challenges, but also come out stronger from them. We've done that with the pandemic, we've done that recently with the global trade war, and now we're dealing with it in the memory situation. I would say we're a proven, tested team on this. We've also got, I'd say, an investor-friendly capital allocation framework, where we're focused on paying out 100% of our free cash flow to our shareholders over time, as long as our leverage ratio remains under two times and there aren't better ROI opportunities. What you've seen us do is pay back roughly $19 billion to shareholders over the last five years. I would say also we're very focused on our future work strategy as we move forward. With the continuing rise of AI and the focus on more and more AI being done at the edge that we're focused on delivering against and honestly driving for, I think there's a great opportunity ahead in the long term. Perfect. We just hit all zeros, so. We did. Awesome. Thank you, Erik. Thanks very much for joining us. Yeah, thank you.