Key Takeaways
- HP to cut 4,000-6,000 jobs by fiscal 2028, aiming for $1 billion annual savings
- Profit outlook falls short of analyst estimates due to rising memory chip costs
- Restructuring charges estimated at $650 million, with $250 million in fiscal 2026
- Shares dropped 4% in extended trading following the announcement
HP Inc. has announced significant workforce reductions of 4,000 to 6,000 employees through fiscal 2028 as the company’s profit outlook missed analyst expectations. The PC and printer maker expects to achieve $1 billion in annual gross savings by implementing AI tools across product development, customer support, sales and manufacturing operations.
CEO Enrique Lores stated in an interview that these measures are essential for maintaining competitiveness. The restructuring will incur approximately $650 million in charges, with about $250 million occurring in the current fiscal year that began November 1.
Financial Performance and Workforce Impact
HP’s current workforce stands at approximately 58,000 as of October 2024. This marks the second major restructuring in three years, following a similar program that eliminated 4,000-6,000 positions and delivered $2.2 billion in savings when the company employed about 61,000 workers.
The company projected full-year profit, excluding restructuring charges, between $2.90 to $3.20 per share, below the average analyst estimate of $3.32. For the quarter ending in January, HP expects adjusted earnings of 73 to 81 cents per share, compared to the 78-cent analyst consensus.
Market Challenges and Strategic Response
Rising memory chip costs are undermining the benefits of the current PC sales cycle, according to the company. While HP has sufficient inventory to cushion the impact through the first half of the year, Lores outlined aggressive measures for the second half including diversifying memory suppliers, optimizing memory usage in products, and implementing price increases where necessary.
The company has been relocating manufacturing facilities outside China for North American products to mitigate tariff impacts, even as it faces increasing memory prices during a period of strong customer demand for AI-enabled PCs and Windows 11 upgrades.
Fourth Quarter Performance
In the fiscal fourth quarter ended October 31, HP reported sales growth of 4.2% to $14.6 billion, with adjusted earnings of 93 cents per share beating the 92-cent analyst estimate. The PC unit delivered strong 8% revenue growth driven by Windows 11 upgrades and AI PC interest, while printer sales declined 4% to $4.27 billion, matching expectations.
The company’s shares fell approximately 4% in extended trading after closing at $24.32, extending the stock’s 25% decline year-to-date prior to the earnings release.
