HP Inc. gave a profit outlook for current year that fell short of estimates and the company said it will cut 4,000 to 6,000 employees through fiscal 2028 by using more AI tools.
The Palo Alto PC and printer maker will exit 2028 with gross savings of $1 billion annually as a result of the cuts. The savings will come from HP applying AI tools to areas like product development, customer support, sales and manufacturing, Chief Executive Enrique Lores said in an interview. “It’s something we have to do to make sure the company stays competitive,” he said.
The cuts will result in about $650 million in restructuring charges, with about $250 million of that in fiscal 2026, which began Nov. 1, the company said Tuesday in a statement. The company’s workforce was about 58,000 as of October 2024.
Shares of HP declined as much as 3% after markets opened in New York on Wednesday. The stock had dropped 25% this year before the results were released.
Three years ago, HP unveiled a different cost-cutting program also aimed at eliminating 4,000 to 6,000 jobs. At the time, it employed about 61,000 workers. The company said that plan resulted in gross savings of $2.2 billion.
Profit for the year, excluding items such as the restructuring charges, will be $2.90 to $3.20 a share. Analysts, on average, expected $3.32, according to Bloomberg-compiled data. HP projects earnings per share, excluding items, to be 73 cents to 81 cents in the period ending in January. Wall Street estimated 78 cents.
The shortfall stems from rising costs for the memory chips that go into computers. That increase blunts the benefits of a sales cycle for PCs. HP has enough inventory to limit the impact in the first half of the year.
“For the second half, we are taking a prudent approach to our guide, while at the same time we’re implementing aggressive actions” like bringing on more memory suppliers, putting less memory in products where it isn’t needed by customers and raising prices when necessary, Lores said.
HP has been cutting costs and shifting to manufacturing facilities outside of China for almost all of its products sold in North America in order to mitigate tariff impacts. Now, as customers buy new PCs to replace outdated gear and get new AI features, it’s contending with increasing memory prices.
In the fiscal fourth quarter, which ended Oct. 31, HP said sales rose 4.2% to $14.6 billion. Profit, excluding some items, was 93 cents a share. Analysts, on average, projected adjusted earnings per share of 92 cents on revenue of $14.5 billion.
Revenue increased 8% in HP’s PC unit, fueled by customers upgrading to machines with Windows 11 and interest in AI PCs that have special chips.
Sales in the company’s printer unit fell 4% to $4.27 billion, in line with estimates.
Bass writes for Bloomberg.