HP is cutting costs as demand slows down for PCs and printers, and analysts are excited, believing the company may be about to unleash a wave of earnings power.

On Tuesday the tech giant unveiled a massive $1.4 billion cost-reduction plan that will cut 4,000 to 6,000 jobs by 2025, reducing the size of the company’s workforce by 12%.

In a note to clients, Citi analyst Jim Suva wrote, “To put this in context, that is $0.50 of EPS help in fiscal year 2023 and over $1 of EPS exiting fiscal year 2025 and we believe that is a big positive that investors did not expect.”

Enrique Lores, CEO of HP said in the interview the job cuts were motivated by a “tough market environment.”

Fourth quarter sales fell 11.2% from one year prior, driven down by a 26% decline in notebook computer sales. At the same time, desktop sales declined 3% in the quarter and consumer printer sales dropped 4%, though commercial printer sales gained 5%.

Even with the declines in sales, the company still beat analyst forecasts in all categories. Net sales were $14.8 billion, vs analyst forecasts of $14.65 billion. Personal system sales were $10.3 billion vs a $10.28 billion estimate. Printer sales were $4.5 billion vs a $4.41 billion estimate. Diluted EPS was $0.85 vs $0.84 estimated.

The cost-cutting plan caused a 1.8% rise in HP stock Wednesday, as investors showed their approval of it.

In guidance for the new fiscal year, the company took a cautious approach following this quarter’s headwinds.

It estimated EPS between $0.70 and $0.80. Analysts estimated $0.86. Full year earnings are projected to be $3.20 to $3.60 for the year. The Wall Street Estimates was $3.61.

The economic headwinds are expected to continue into next year, with Deutsche Bank analyst Sydney Ho stating, “Market stays challenging, but margins should improve in the second half of fiscal year 2023.”