HP Shares Face Mounting Headwinds from Costs and Restructuring

HP US40434L1052

The outlook for HP Inc. is being clouded by a confluence of financial pressures. Rising memory component costs are squeezing profit forecasts, while a major, cost-driven restructuring plan involving significant job cuts is underway. A central question for investors is whether the company's accelerated artificial intelligence (AI) strategy can provide enough near-term lift to offset these burdens.

Key Performance and Financial Data:
* Technical Weakness: Approximately 77% of technical indicators point to further potential downside, with market sentiment gauges reflecting a "Fear" environment.
* Share Price Decline: The stock has retreated roughly 30.1% over the past 12 months, with a 30-day performance of -4.61%.
* Memory Cost Impact: Rising memory prices are projected to reduce earnings per share (EPS) by an estimated $0.30, with the majority of this effect anticipated in the second half of fiscal year 2026.
* Restructuring Plan: HP plans to eliminate between 4,000 and 6,000 positions by the end of fiscal 2028, with total restructuring charges expected to reach about $650 million. Roughly $250 million of these costs are forecast for FY2026.
* Cash Flow & Dividend: Management guides for free cash flow of $2.8 to $3.0 billion in FY2026. The quarterly dividend remains $0.30 per share, payable on January 2, 2026.

Market analysts are highlighting memory sector dynamics as a primary challenge for HP's FY2026 earnings. The substantial estimated headwind of $0.30 per share is largely expected to materialize in the latter half of the fiscal year. Industry reports cite supply constraints and higher prices for memory components as the key drivers behind this forecasted pressure.

This cost inflation, combined with ongoing softness in the printing segment, continues to influence the stock's negative momentum. Short-term technical metrics reinforce this bearish sentiment.

Strategic Shift: AI Integration and Workforce Reduction

In response, HP is advancing its "Future Ready" transformation strategy, which involves a heightened focus on AI-driven operational processes. The long-term objective is to achieve gross run-rate savings of approximately $1 billion by the close of fiscal 2028. A central component of this plan is the reduction of 4,000 to 6,000 jobs, primarily in manual and administrative roles.

However, these savings come with upfront expenses. The company has announced total restructuring charges of around $650 million, with about $250 million slated for FY2026. Consequently, it is unlikely the efficiency gains will fully neutralize the projected memory cost increases in the immediate term. The economic benefits of the restructuring are expected to accumulate gradually as the 2028 target date approaches.

Recent Resilience and the Critical Year Ahead

Despite current pressures, HP demonstrated revenue resilience in fiscal 2025. Total revenue increased by 3.2% to $55.3 billion, powered by an 8% growth in the Personal Systems segment. GAAP EPS for FY2025 was $2.65, a year-over-year decrease of 5.7%, while non-GAAP EPS came in at $3.12, down 9.0%. The company generated $2.9 billion in free cash flow and returned $1.9 billion to shareholders through buybacks and dividends.

The coming fiscal year is set to be a decisive test. The free cash flow guidance of $2.8–$3.0 billion and the planned $250 million in restructuring costs for FY2026 will be critical indicators of management's ability to stabilize margins. The near-term trajectory of the share price will likely hinge on a single pivotal issue: whether the AI-led cost savings can be realized faster than the mounting expenses in the memory supply chain.