HP Layoffs 2500 Employees As Stock Slides 19% On Weak Warnings Outlook, signaling a turbulent period for the tech giant.
Despite reporting better-than-expected revenue for the January quarter, HPE faced significant market challenges, including steep discounts on traditional servers and an inventory buildup of older AI hardware.
These factors, combined with a disappointing earnings forecast, led to a sharp decline in investor confidence.
In response to these financial pressures, HPE announced plans to cut 2,500 jobs—about 5% of its workforce—over the next 18 months as part of a broader cost-cutting initiative.
The company also expects pricing adjustments due to rising U.S. tariffs, adding further strain to its outlook.
HP Layoffs 2500 Employees As Stock Slides 19% On Weak Warnings Outlook:
Hewlett Packard Enterprise’s stock plummeted 19% in after-hours trading on Thursday following the release of its weaker-than-expected earnings forecast.
Key Takeaways:
- Hewlett Packard Enterprise (HPE) exceeded revenue expectations for the January quarter despite facing steep market discounts.
- However, the company’s guidance for the upcoming quarter and the full fiscal year fell short of forecasts.
- HPE will reduce its workforce by 2,500 employees—approximately 5%—including expected attrition.
HP Layoffs 2500 Employees And Stock Slides 19% – How is First Quarter Performance:
The company reported its fiscal first-quarter results, comparing them to analyst expectations from LSEG:
- Earnings per share: 49 cents (adjusted), in line with expectations.
- Revenue: $7.85 billion, slightly exceeding the forecasted $7.82 billion.
Revenue grew 16% year-over-year in the quarter ending January 31. HPE recorded a net profit of $598 million, or 44 cents per share, up from $387 million (29 cents per share) in the previous year. Adjusted earnings per share exclude stock-based compensation.
CEO Antonio Neri admitted, “We could have executed better” on a call with analysts. The company faced inventory challenges with AI servers due to a transition to Nvidia’s next-generation Blackwell graphics processing units.
AI system backlogs grew 29% from the previous quarter to $3.1 billion, while total server revenue hit $4.29 billion.
HPE’s Chief Financial Officer, Marie Myers, stated that the company had to aggressively discount traditional servers, which weighed on earnings. As the quarter progressed, HPE took steps to limit travel and discretionary expenses.
“We expect pricing adjustments may negatively impact top-line growth in the near term,” Myers warned.
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Cost-Cutting Measures and Layoffs:
In response to financial pressures, HPE announced a cost-cutting initiative that includes job reductions over the next 18 months. The move is expected to generate $350 million in savings by the 2027 fiscal year.
The layoffs will impact around 2,500 employees, representing roughly 5% of HPE’s workforce when accounting for anticipated attrition. As of October 2024, HPE had 61,000 employees, according to its latest annual report.
In addition to job cuts, HPE will scale back other discretionary expenditures.
Market Challenges and Future Outlook:
HPE’s weak financial guidance triggered investor concerns, causing its stock to decline sharply.
The company projected second-quarter adjusted earnings of 28 to 34 cents per share on revenue between $7.2 billion and $7.6 billion—well below analyst estimates of 50 cents per share on $7.93 billion in revenue.
For the 2025 fiscal year, HPE expects adjusted earnings per share in the range of $1.70 to $1.90, compared to analysts’ projections of $2.13 per share.
HPE also anticipates pricing adjustments due to increased costs from U.S. tariffs. Neri emphasized that the company is working to mitigate the impact of tariffs by optimizing its global supply chain.
Legal and Regulatory Challenges:
Adding to HPE’s headwinds, the U.S. Department of Justice is attempting to block its planned $14 billion acquisition of Juniper Networks, citing antitrust concerns.
The case is set to go to trial in July, with HPE still expecting to close the deal by October 2025.
Stock Performance:
Despite the recent sell-off, HPE shares had been up about 2% in 2025 before the earnings release.
Meanwhile, the S&P 500 index had declined 2% over the same period.
Regulatory and Market Challenges Add Pressure:
Beyond financial struggles, Hewlett Packard Enterprise (HPE) is facing regulatory hurdles that could impact its long-term strategy.
The U.S. Department of Justice has moved to block HPE’s planned $14 billion acquisition of Juniper Networks, citing antitrust concerns.
A trial is set for July, and while HPE remains confident in the deal closing by October 2025, the legal battle adds uncertainty.
Additionally, U.S. tariffs on imports from Mexico, Canada, and China are weighing on HPE’s costs.
CFO Marie Myers acknowledged that these tariffs could further impact earnings in the coming months, though the company is working to mitigate their effects through supply chain adjustments.
CEO Antonio Neri also emphasized that pricing strategies will be updated to reflect these rising costs.
HPE’s Financial Performance: A Mixed Bag
Despite a 16% year-over-year increase in revenue to $7.85 billion, HPE’s earnings guidance fell well below Wall Street expectations.
While its AI-driven server business saw growth, other segments faced margin pressures. Server revenue rose by 29% to $4.3 billion, and Hybrid Cloud revenue increased by 10% to $1.4 billion.
However, Intelligent Edge revenue declined by 5% to $1.1 billion, and overall operating margins were squeezed due to aggressive discounting in the market.
The company’s cost-cutting measures, including layoffs and discretionary spending reductions, are aimed at saving $350 million by 2027.
However, with profit projections for 2025 falling short of analyst expectations and regulatory challenges ahead, HPE faces a tough path forward as it navigates market uncertainty.
Final Thoughts:
Hewlett Packard Enterprise faces a challenging road ahead, balancing cost reductions, pricing pressures, and legal hurdles.
While the company remains committed to navigating these obstacles, its weak forecast and market uncertainties have shaken investor confidence.
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