HP’s AI-driven cost reduction plan could change the game for investing in HP (HPQ)

• At the recent Morgan Stanley Technology, Media & Telecom Conference, HP Inc. CFO Karen Parkhill outlined how the company is addressing rising memory costs and weak demand by securing supply and increasing prices, while continuing to invest in AI PCs, secure printers, subscriptions and AI-enabled efficiencies, with the goal of reducing costs by $1 billion by 2028.
• In parallel, HP board member Songyee Yoon’s comments on the viral AI jobs report highlighted how the company’s AI ambitions sit within a broader debate about technology’s impact on work and society.
• Here, we assess how HP’s plan to reduce costs by US$1 billion with AI could impact the company’s existing investment story and risks.

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HP Investment Story Summary

To own HP, you need to believe that HP can transform its mature PC and printing base into a more efficient AI-enhanced platform while protecting profits in a tough hardware market. Comments from the latest conference confirm that while the key catalyst in the near term is AI PC and service execution, the biggest risk is continued pressure in the core print and PC businesses. The new USD 1 billion AI cost reduction goal confirms this story, but does not fundamentally change it.

Of all the recent developments, the most relevant here is HP’s plan to leverage AI to reduce costs by $1 billion by fiscal year 2028, as stated by CFO Karen Parkhill. For companies grappling with rising memory costs and weak demand, this program sits right at the intersection of key drivers (AI PC expansion, secure printing and subscriptions) and core risks. That said, competitive pricing and structurally weak print demand could keep margins under pressure if these savings are not achieved.

But while the AI ​​savings plan may sound encouraging, investors should be aware of how exposed HP remains to structurally declining print demand.

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The HP story projects sales of $56.8 billion and profits of $2.9 billion by 2028. This would require annual sales growth of 1.3% and profits to increase by about $300 million from the current $2.6 billion.

We reveal how HP’s projections yield a fair value of $19.99, 9% above the current price.

explore other perspectives

Before this news, the most optimistic analysts were expecting sales of nearly US$57.6 billion and profits of about US$3.8 billion by 2028, mainly related to AI-driven products and cost reductions. This view is much more optimistic than the consensus and relies heavily on HP’s AI PC execution, and this latest update could either strengthen it or cast doubt on it, so it’s worth comparing these different expectations for yourself.

Check out 7 other fair value estimates for HP – Find out why the stock is worth more than twice its current price.

decide for yourself

Don’t just follow the ticker, dig deep into the data and truly build your own beliefs.

• A great starting point for HP Research is our analysis that highlights 2 key benefits and 4 key warning signs that could influence your investment decision.
• Our free HP research report provides comprehensive fundamental analysis compiled into a single visual (snowflake), making it easy to assess HP’s overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.

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