HP Stock: Why Shares Dropped 6% Despite Beating Earnings

TLDR

• HP Inc. will cut 4,000 to 6,000 jobs (up to 10% of workforce) by the end of fiscal 2028
• Memory chip prices surging due to AI demand will cost the company about 30 cents per share in fiscal 2026
• Full-year fiscal 2026 earnings guidance of $2.90 to $3.20 per share falls short of analyst expectations of $3.33
• Personal computer revenue rose 8% to $10.4 billion while printer revenue dropped 4% to $4.3 billion
• U.S. trade regulations are adding costs to HP’s operations

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HP Inc. reported fourth-quarter results that beat Wall Street expectations but warned investors that rising costs are coming. The company announced plans to eliminate up to 6,000 jobs over the next three years.

Shares dropped 6% in after-hours trading Tuesday following the news. The stock has lost 25% of its value this year while the broader S&P 500 has gained 15%.

HP Inc., HPQ

The company earned 93 cents per share on revenue of $14.64 billion for the quarter ending October 31. Analysts had expected 92 cents per share on $14.48 billion in revenue. Net income reached $795 million, up from $763 million a year earlier.

But the forward-looking guidance disappointed investors. HP expects first-quarter adjusted earnings between 73 cents and 81 cents per share. The consensus estimate was 79 cents.

For the full fiscal 2026, the company projects adjusted earnings of $2.90 to $3.20 per share. Analysts had forecast $3.33 per share.

Memory Costs Create Headwinds

CEO Enrique Lores pinned the weak outlook on skyrocketing memory chip prices. Demand for AI hardware is driving up costs for RAM components. Memory now accounts for 15 to 18% of a typical PC’s cost.

HP also cited U.S. trade regulations as a factor weighing on its outlook. The company said it faces added costs from current trade rules.

The restructuring plan will reduce HP’s headcount by 4,000 to 6,000 employees through fiscal 2028. That represents up to 10% of the company’s 58,000-person workforce. HP expects the cuts to save at least $1 billion annually once complete.

The company will take about $650 million in restructuring charges. Of that total, $250 million will hit in fiscal 2026. This marks HP’s second major layoff round in three years after similar cuts in 2022.

Windows 11 Boosts PC Sales But Printers Lag

The personal systems division posted strong results. Revenue jumped 8% to $10.35 billion, beating the $10.15 billion estimate. Demand for AI-capable PCs helped drive growth.

Microsoft’s decision to end Windows 10 support in October is creating an upgrade cycle. About 60% of HP’s installed base has already moved to Windows 11. The company expects more customers to replace older machines.

Printer revenue fell 4% to $4.3 billion. CFO Karen Parkhill said customers are delaying purchases of new printing equipment. Lores believes companies are directing more capital toward AI investments instead of printer upgrades.

The competitive pricing environment in printing continues to pressure margins. HP plans to introduce AI-driven innovations in its printer lineup to reignite demand.

Lores said the company sees opportunities to embed AI throughout its operations. The goal is to speed product development, improve customer service, and increase productivity. HP reported fourth-quarter results on Tuesday with fiscal 2026 guidance reflecting memory cost pressures and trade regulation impacts.

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