(Nov 26): 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 artificial intelligence (AI) tools.
The PC and printer maker will exit 2028 with gross savings of US$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 officer 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 US$650 million in restructuring charges, about US$250 million of that in fiscal 2026, which began on Nov 1, the company said Tuesday in a statement. The company’s workforce was about 58,000 as of October 2024.
Three years ago, HP unveiled a different cost-cutting programme also aimed at eliminating 4,000 to 6,000 jobs. At the time, the company employed about 61,000 workers. HP said that plan resulted in gross savings of US$2.2 billion.
Profit for the year, excluding items such as the restructuring charges, will be US$2.90 to US$3.20 a share. Analysts, on average, expected US$3.32. HP projects earnings per share, excluding items, to be 73 cents to 81 cents in the period ending in January. Analysts, on average, estimated 78 cents.
The shortfall stems from rising costs for the memory chips that go into computers, a jump which is blunting the benefits of a sales cycle for PCs. HP has enough inventory to limit the impact in the first half of the year.
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“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 Now, as customers buy new PCs to replace outdated gear and get new AI features, it’s contending with increasing memory prices.
The shares declined about 4% in extended trading after closing at US$24.32 in New York. The stock had dropped 25% this year before the results were released.
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In the fiscal fourth quarter, which ended Oct 31, HP said sales rose 4.2% to US$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 US$14.5 billion.
Revenue increased 8% in HP’s PC unit, fuelled 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 US$4.27 billion, in line with estimates.
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