HP is gearing up for a significant restructuring effort. The tech giant has announced plans to cut between 4,000 and 6,000 jobs globally by fiscal 2028, as part of a comprehensive cost-cutting strategy to enhance competitiveness in the era of artificial intelligence. CEO Enrique Lores termed this move as essential to maintain competitiveness, aiming to revamp operations and integrate AI tools extensively across product development, customer support, and manufacturing. Despite this strategic shift, investors showed less enthusiasm, with HP’s shares dropping by 5.5% in extended trading after the announcement.
Here are the key points of the story:
HP is relying on AI to drive operational efficiency and cost savings. The company aims to achieve annual savings of $1 billion by 2028, primarily through leveraging artificial intelligence to automate and optimize various aspects of its business. CEO Lores emphasized the necessity of this step to ensure the company’s competitiveness.
AI tools will be utilized in areas such as product design, sales, customer service, and manufacturing to accelerate innovation, enhance customer experience, and boost productivity. Lores clarified that HP’s restructuring is not merely a response to market conditions but a part of a long-term strategy to future-proof the company against technological disruptions.
The layoffs will impact teams involved in product development, internal operations, and customer support, as confirmed by Lores in a media briefing. This initiative is expected to generate $1 billion in gross run rate savings over three years. While this is not the first time HP has downsized its workforce, the current cuts signal a more aggressive shift towards automation and efficiency.
Despite the workforce reductions, HP remains positive about the growth potential in its AI PC segment, driven by increasing demand. The company disclosed that over 30% of total shipments in the fourth quarter, ending on October 31, comprised AI-enabled laptops. These advanced PCs are anticipated to play a crucial role in revenue generation as businesses and consumers seek devices capable of running on-device AI models for enhanced productivity and creativity.
However, HP faces financial challenges from escalating memory chip costs, despite leveraging AI to reduce expenses. Analysts have cautioned that the surge in memory chip prices, propelled by AI infrastructure demand, could squeeze profit margins for PC manufacturers like HP, Dell, and Acer. The company foresees the impact of rising prices on memory chips like DRAM and NAND in the latter half of fiscal 2026 but assures that it is adequately prepared in the short term.
HP’s cautious financial outlook reflects in its projections for fiscal 2026, expecting adjusted profit per share between $2.90 and $3.20, below analysts’ average estimates. For the upcoming first quarter, HP anticipates adjusted earnings per share between 73 and 81 cents, slightly under market expectations. This move aligns HP with other tech giants restructuring to embrace AI, such as Amazon and Apple, who have also announced significant job cuts to adapt to the evolving technological landscape.
As HP navigates the transformative power of AI, the company’s decision underscores the dual impact of technological advancement—promising innovation and efficiency gains alongside the challenging reality of job losses for thousands of employees.