HP says memory costs doubled in one quarter, now account for 35% of PC build materials

Source: Tom’s Hardware

Image credit: Getty Images

Memory Cost Surge

HP revealed during its Q1 2026 earnings call on Tuesday, Feb. 25 that memory now accounts for 35 % of the cost of materials needed to build a PC, up from between 15 % and 18 % in the previous quarter. CFO Karen Parkhill said memory costs increased roughly 100 % sequentially from Q1 to Q2, with expectations for further increases throughout the year.

Supply‑Chain Response

Interim CEO Bruce Broussard explained that HP is:

• Securing long‑term supply agreements for the year.
• Qualifying new suppliers and building strategic inventory positions for key platforms, cutting the time to qualify new material in half.
• Expanding lower‑cost sourcing across its commodity basket and lowering logistics costs with agile end‑to‑end planning processes.

HP is leveraging internal AI initiatives to power these new supply‑chain processes.

Drivers of the Increase

The surge reflects the ongoing DRAM shortage driven by AI and datacenter demand. Memory manufacturers Samsung, SK hynix, and Micron have been prioritizing production of high‑bandwidth memory for AI accelerators over consumer DRAM, creating severe supply constraints for PC makers. TrendForce projects PC DRAM contract prices will increase 90 %–95 % quarter‑over‑quarter in Q1 2026, a record quarterly price surge.

Financial Results

Despite the cost pressures, HP reported strong Q1 results:

• Total revenue: $14.4 billion (up 7 % YoY).
• Personal Systems division: unit sales up 14 % in consumer and 11 % in commercial segments, driven by Windows 11 upgrade cycles and growing AI PC adoption.

President for Personal Systems, Ketan Patel, said AI PCs now represent 35 % of HP’s PC shipments, up from 30 % in the prior quarter.

Margin Outlook

Parkhill warned that Personal Systems operating margins will remain below HP’s long‑term range for the remainder of fiscal 2026 due to memory cost pressures. The company maintained its full‑year guidance but expects results to land at the lower end of the range.

Industry Context

HP is not alone in facing these challenges. Dell and Lenovo have issued similar warnings about rising component costs and tighter margins. Parkhill noted that HP is “aligned with industry experts” projecting the PC market will contract by double digits in calendar year 2026 as manufacturers pass higher costs to consumers through price increases.

AI PC Adoption Strategy

HP continues to work with over 100 software developers to drive AI PC adoption as a strategy to maintain demand despite higher prices.

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