HP outlines job cuts and lower guidance tied to U.S. trade regulations
HP Inc. said it will reduce its headcount by 4,000 to 6,000 people, a cut that could reach 10% of its workforce, while also providing earnings guidance for fiscal 2026 that came in below analyst expectations. Shares fell 6% in extended trading following the announcement, which the company linked to the additional costs created by current U.S. trade-related regulations.
Quarterly results compared with expectations
Here’s how HP performed versus LSEG consensus estimates:
- EPS: 93 cents adjusted vs. 92 cents expected
- Revenue: $14.64 billion vs. $14.48 billion expected
Revenue for the quarter, which ended Oct. 31, rose 4% year over year. Net income reached $795 million, or 84 cents per share, compared with $763 million, or 80 cents per share, in the same quarter last year.
Guidance for fiscal 2026 falls short of forecasts
For the first quarter of fiscal 2026, HP projected adjusted net earnings of 73 cents to 81 cents per share, while LSEG analysts expected 79 cents. For the full fiscal year, HP anticipates earnings of $2.90 to $3.20 per share, below the $3.33 consensus. The company said its outlook reflects added costs driven by U.S. trade regulations and its efforts to mitigate their impact.
Performance across business units
HP’s personal systems division, which includes desktop and laptop computers, generated $10.35 billion in revenue, an 8% increase that came in above StreetAccount’s $10.15 billion consensus. The printing segment reported $4.3 billion in revenue, a 4% decline. Chief Financial Officer Karen Parkhill said the pricing environment remains competitive and customers are delaying new model purchases.
Restructuring timeline and financial impact
HP expects to complete the layoffs by the end of fiscal 2028. The restructuring is projected to deliver at least $1 billion in annualized gross run-rate savings by that time. The company expects about $650 million in charges related to the plan, with $250 million falling in fiscal 2026. HP reported a headcount of 58,000 employees as of December and previously executed a similarly sized round of layoffs in 2022.
Comments from leadership on AI and memory costs
CEO Enrique Lores told analysts he sees room to integrate AI into HP’s operations to support product innovation, improve customer satisfaction, and raise productivity. He noted that many corporate leaders are looking to generative AI to speed up development and automate customer service, while cloud providers are purchasing large volumes of memory to support companies building AI models. Memory costs now represent 15% to 18% of the cost of a typical PC, and Lores said their increase has accelerated in recent weeks.
Lores added that HP expects to benefit from Microsoft ending support for Windows 10 in October, which could encourage customers to buy new computers. Around 60% of HP’s installed base has moved to Windows 11.
Market performance
As of Tuesday’s close, HP shares were down 25% for the year, compared with a 15% gain for the S&P 500 index.
Featured image credits: Wikimedia Commons
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