HP to Cut Up to 6,000 Jobs in AI-Driven Restructuring
PALO ALTO, Calif. Tech giant HP Inc announced Tuesday that it will cut between 4,000 and 6,000 jobs worldwide by fiscal 2028. The company is trying to streamline operations and shift towards artificial intelligence, even as the AI boom threatens to hurt its profit margins.
These layoffs will impact teams in product development, internal operations, and customer support. This marks another round of cuts for HP, which already laid off 1,000 to 2,000 employees in February as part of a previous restructuring effort.
CEO Enrique Lores described the decision as crucial for HP's future competitiveness. He told reporters the company expects this initiative to save $1 billion over three years. He also noted that these savings would be reinvested in AI capabilities to speed up product development, improve customer satisfaction, and increase overall productivity.
The AI Paradox
The announcement reveals a significant paradox in HP's strategy. As the company embraces AI for its future, the rapid growth of this technology is creating serious financial challenges.
HP has seen strong demand for AI-enabled PCs, which made up over 30% of the company's shipments in the fourth quarter ending October 31. However, this success comes at a cost.
Big Tech's large investments in AI infrastructure have led to a global shortage of memory chips, raising prices for the components HP needs to create its AI-powered devices. Prices for dynamic random-access memory (DRAM) and NAND flash memory—both essential chip types—have sharply increased as data center operators rush to secure supplies.
Morgan Stanley analysts have warned that the rise in chip prices could significantly impact profits for consumer electronics manufacturers like HP, Dell, and Acer.
Bracing for Impact
Lores acknowledged the impending cost pressures, telling investors that HP expects to feel the full effect in the second half of fiscal 2026, with price increases impacting the bottom line.
The company believes it has enough inventory to manage the first half of the fiscal year but is already taking steps to protect itself. HP is qualifying lower-cost suppliers, reducing memory configurations in some products, and preparing to raise prices—all while navigating a sensitive market.
"We are taking a careful approach to our forecasts for the second half, while also implementing strong actions," Lores said.
Missing the Mark
The financial outlook HP presented Tuesday did not meet Wall Street's expectations, indicating that investors should brace for a rough period.
The company projects adjusted earnings per share for fiscal 2026 between $2.90 and $3.20, which is below the analyst consensus of $3.33, according to data compiled by LSEG. For the first quarter, adjusted profit is expected to be between 73 cents and 81 cents per share, with the midpoint falling short of the 79-cent estimate.
There was some good news: fourth-quarter revenue hit $14.64 billion, surpassing analyst expectations of $14.48 billion. However, this positive figure did little to ease concerns about the challenges on the horizon.
The Human Cost
Behind the corporate strategy and financial projections are thousands of workers who will lose their jobs over the next three years. The layoffs will ripple through HP's global workforce, affecting employees in various departments and regions.
For those in product development, internal operations, and customer support, the message is clear: the company thinks AI can perform their tasks better. This highlights how artificial intelligence is not just changing the products tech companies offer but also reshaping their workforce.
This is HP's second major round of layoffs in less than a year, showing that the company is under ongoing pressure to lower costs and improve margins in a competitive and capital-intensive technology landscape.
Industry-Wide Pressures
HP's challenges represent broader issues facing the traditional PC industry. Once-dominant players like HP and Dell are squeezed between rising component costs, fierce competition, and the large investments needed to stay relevant in the AI era.
The memory chip shortage, driven by major companies like Microsoft, Amazon, and Google expanding AI data centers, has created a situation where consumer electronics makers are competing with some of their biggest customers for limited supplies.
At the same time, the rapid growth of AI-enabled PCs has opened new market opportunities but has also raised consumer expectations. Companies must invest heavily in AI capabilities while managing the cost pressures that threaten their profits.
What's Next
As HP moves ahead with its restructuring, the company must find the right balance. It needs to cut costs enough to meet its $1 billion savings goal while also investing adequately in AI to stay competitive.
The success of this strategy will not be clear for years, but initial signs suggest a tough road ahead. Missing earnings expectations while announcing significant layoffs rarely builds confidence. The anticipated chip cost pressures could also turn out to be worse than expected.
For now, HP is banking on having fewer employees and more AI leading to a more profitable future. Whether this approach works may not only affect HP's future but could also serve as a test of how legacy tech companies can—or cannot—adapt to an AI-driven world.
The workers losing their jobs in this transformation are unlikely to find much comfort in being part of such an experiment.
HP has not yet specified which regions or facilities will be hit hardest by the layoffs. Affected employees should expect to be informed over the coming months as the company starts implementing its restructuring plan.
