HP Inc. Has a Memory Problem. Financial Forecasts Take a Hit.

HP reported better-than-expected fourth-quarter earnings. (David Paul Morris/Bloomberg)

The rise of artificial intelligence is turning out to be a problem for HP Inc. on two fronts.

HP Inc.’s CEO said skyrocketing prices for memory chips will be a “fairly significant” drag on its results for the current fiscal year as the company issued financial guidance that fell short of what analysts had expected. At the same time, he said, customers are investing more in AI, leaving less money to buy new printers.

While results for the computer company’s fiscal fourth quarter exceeded forecasts, management said it expects fiscal first-quarter adjusted earnings to be between 73 cents and 81 cents a share. The consensus forecast on Wall Street was for 78 cents.

For the full fiscal year, the 12 months through October 2026, HP said it expects earnings to be $2.90 to $3.20 a share, compared with analyst expectations of $3.34.

CEO Enrique Lores said in an interview with Barron’s that earnings will be affected as memory costs increase in response to rising demand for chips that support artificial-intelligence hardware.

“From a supply perspective, we’re in a good position, but clearly we see price increases,” Lores said. “We think that the impact is going to be around 30 cents for the full year, so it’s fairly significant.”

He added that HP is taking “very aggressive actions,” to mitigate that.

“We are taking a prudent approach to our guide while we’re implementing aggressive actions like qualifying lower-cost suppliers, producing memory configurations, and increasing prices,” Lores said.

The company also announced that it’s cutting from 4,000 to 6,000 employees.

Shares of HP were falling 7.4% in after-hours trading following the results.

HP also posted fiscal fourth-quarter adjusted earnings of 93 cents a share from revenue of $14.64 billion. Analysts surveyed by FactSet were expecting earnings of 92 cents a share from revenue of $14.5 billion.

“We had a strong Q4 that establishes a solid foundation for next year,” Lores said.

Personal-systems revenue came in at $10.4 billion, up 8% from the prior year, driven in part by rising demand for AI personal computers and the introduction of the Windows 11 operating system.

Microsoft stopped providing support for the Windows 10 operating system in October. Technical assistance and software updates for Windows 10 systems are no longer being provided, unless customers pay a per-device fee to cover one year. That has created an incentive for people and businesses to upgrade their laptops.

Revenue from HP’s printer business fell 4% from a year earlier to $4.3 billion.. Lores told Barron’s that he believes companies are prioritizing investments in AI, and therefore aren’t upgrading their printers.

“This is why we are also introducing innovation on the print side driven by AI, because in a matter of time customers will have to buy them, given that they continue to use them,” Lores said.

Write to Angela Palumbo at angela.palumbo@dowjones.com