TLDR
- HP Inc. cutting 4,000 to 6,000 jobs through fiscal 2028 to save $1 billion annually
- Fiscal 2026 earnings forecast of $2.90 to $3.20 per share trails analyst expectations of $3.33
- AI-driven memory chip price increases will reduce earnings by 30 cents per share
- Fourth-quarter earnings beat estimates at 93 cents per share on $14.64 billion revenue
- Shares declined 6% after-hours despite PC revenue climbing 8% year-over-year
HP Inc. topped fourth-quarter earnings expectations but shocked investors with disappointing guidance for fiscal 2026. The company will eliminate thousands of jobs as memory chip costs eat into profits.
Shares dropped 6% in extended trading Tuesday. The stock has fallen 25% this year while the S&P 500 has climbed 15%.
The company posted adjusted earnings of 93 cents per share on revenue of $14.64 billion for the quarter ended October 31. Analysts projected 92 cents per share on $14.48 billion in sales. Net income grew to $795 million from $763 million in the prior-year period.
The trouble lies ahead. HP expects first-quarter adjusted earnings between 73 cents and 81 cents per share. Wall Street wanted 79 cents. Full-year guidance of $2.90 to $3.20 per share missed the $3.33 consensus estimate.
Memory Costs Squeeze Margins
CEO Enrique Lores pointed to soaring memory chip prices as the main culprit. Growing demand for AI hardware is driving up costs for RAM components across the tech industry. Memory now makes up 15% to 18% of a typical PC’s total cost.
Lores told Barron’s the memory situation will cost about 30 cents per share for the full year. HP is responding by qualifying cheaper suppliers and adjusting memory configurations. The company also mentioned U.S. trade regulations as a factor increasing costs.
The workforce reduction will cut 4,000 to 6,000 positions, representing up to 10% of HP’s 58,000 employees. The three-year restructuring plan should deliver at least $1 billion in annual savings by fiscal 2028. HP will incur roughly $650 million in restructuring charges, with $250 million coming in fiscal 2026.
Strong PC Sales Offset Printer Weakness
HP’s personal systems unit delivered $10.35 billion in revenue, up 8% and above the $10.15 billion estimate. The division benefited from demand for AI-equipped PCs and the transition to Windows 11.
Microsoft stopped supporting Windows 10 in October, creating an upgrade opportunity. Lores said 60% of HP’s customer base has already switched to Windows 11. The company expects continued replacements as older systems age out.
The printing business generated $4.3 billion in revenue, down 4% from last year. CFO Karen Parkhill blamed competitive pricing and customers delaying new equipment purchases. Lores suggested businesses are channeling more spending toward AI projects instead of printer upgrades.
HP plans to roll out AI-enhanced printing products to revive demand. The company wants to embed AI throughout its operations to accelerate innovation and improve productivity. HP announced these results with management citing memory market pressures and regulatory costs affecting fiscal 2026 projections.
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