HP Stock: Memory Chip Crisis Forces Mass Layoffs and Earnings Cut

TLDR

• HP Inc. announces layoffs of 4,000 to 6,000 employees by fiscal 2028
• Fiscal 2026 earnings guidance of $2.90 to $3.20 per share misses analyst target of $3.33
• Memory chip costs jumping 30 cents per share due to AI hardware demand
• PC sales up 8% to $10.4 billion while printer revenue falls 4% to $4.3 billion
• Stock dropped 6% after-hours on weak outlook despite beating quarterly estimates

HP Inc. delivered better-than-expected fourth-quarter results but sent shares tumbling with disappointing future guidance. The company plans to cut up to 6,000 jobs as rising memory costs squeeze margins.

The stock fell 6% in after-hours trading Tuesday. HP shares are down 25% year-to-date compared to a 15% gain for the S&P 500.

HP Inc., HPQ

Fourth-quarter earnings came in at 93 cents per share on $14.64 billion in revenue. That topped Wall Street’s forecast of 92 cents per share on $14.48 billion. Net income increased to $795 million from $763 million a year ago.

But the outlook painted a different picture. HP projects first-quarter earnings of 73 cents to 81 cents per share versus the 79-cent analyst consensus. Full-year fiscal 2026 guidance of $2.90 to $3.20 per share falls short of the $3.33 estimate.

AI Demand Drives Memory Prices Higher

CEO Enrique Lores blamed surging memory chip costs for the weak guidance. AI hardware demand is pushing RAM prices higher across the industry. Memory components now represent 15% to 18% of total PC costs.

The job cuts will eliminate up to 10% of HP’s 58,000-person workforce. The restructuring runs through fiscal 2028 and should generate $1 billion in annual savings. HP will take $650 million in charges with $250 million hitting fiscal 2026.

PC Business Grows While Printing Struggles

HP’s personal systems division generated $10.35 billion in revenue, an 8% increase that beat expectations. Windows 11 adoption is driving upgrade cycles after Microsoft ended Windows 10 support in October. About 60% of HP’s customer base has migrated to the new operating system.

Demand for AI-capable PCs contributed to growth. The company expects more customers to replace aging machines in coming quarters.

Printer revenue declined 4% to $4.3 billion. CFO Karen Parkhill said competitive pricing and delayed purchases are hurting results. Lores believes businesses are prioritizing AI investments over printer upgrades.

HP plans to introduce AI-powered features in its printing products to spark customer interest. The company sees opportunities to use AI across operations to boost efficiency and product development.

The company reported these results for the quarter ending October 31 with guidance reflecting current memory market conditions and regulatory costs.

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