HP Slashes Up to 6,000 Jobs to Fund AI Restructuring
Tech giants accelerate workforce reductions as artificial intelligence reshapes operational priorities. HP Inc. eliminates thousands of positions to redirect resources toward AI integration. This move highlights escalating tensions between innovation demands and employee stability in Silicon Valley.
HP disclosed plans to cut between 4,000 and 6,000 roles globally by fiscal 2028, targeting up to 10 percent of its 60,000-employee base. The reductions focus on product development, internal operations, and customer support teams. CEO Enrique Lores announced the changes during a media briefing, emphasizing efficiency gains to counter market pressures.
The restructuring follows a February round that eliminated 1,000 to 2,000 positions. Combined, these actions aim to produce $1 billion in gross run-rate savings over three years. Shares dropped more than 5 percent in after-hours trading upon the news.
AI drives the pivot, with demand for AI-enabled personal computers comprising over 30 percent of HP’s fourth-quarter shipments ending October 31. These devices incorporate neural processing units for on-device machine learning tasks, boosting features like real-time transcription and image generation. HP accelerates development cycles using generative AI tools to prototype hardware configurations in weeks rather than months.
Cost challenges emerge from AI infrastructure expansion. Surging demand for data center servers inflates prices of dynamic random access memory (DRAM) and NAND flash components by 20 to 30 percent year-over-year. HP forecasts impacts in the second half of fiscal 2026, despite stockpiling inventory for the first half.
Mitigation strategies include qualifying alternative suppliers and optimizing memory allocations in product designs. Lores noted these steps during the call, projecting maintained gross margins above 20 percent. The company also plans targeted price increases on select models to offset rises.
Financial results underscore mixed fortunes. Fourth-quarter revenue reached $14.64 billion, exceeding analyst estimates of $14.48 billion. Adjusted earnings per share hit 89 cents, topping expectations of 82 cents. However, fiscal 2026 guidance tempers optimism, with adjusted profit per share forecasted at $2.90 to $3.20, below the $3.33 consensus.
First-quarter projections show adjusted earnings between 73 cents and 81 cents per share, with the midpoint trailing estimates of 79 cents. Revenue growth hinges on commercial PC sales, expected to rise 3 percent amid enterprise AI upgrades. Consumer segments face headwinds from softening demand in emerging markets.
Broader industry patterns amplify concerns. Dell Technologies and Lenovo report similar AI-fueled restructurings, with collective layoffs exceeding 20,000 in 2025. U.S. Bureau of Labor Statistics data indicate tech sector job growth slowing to 1.2 percent annually, down from 3.5 percent pre-AI boom.
HP’s strategy aligns with ecosystem shifts. Partnerships with Microsoft and Intel integrate Copilot+ capabilities into Spectre and EliteBook lines, enabling 40 trillion operations per second for local AI inference. Deployment timelines target Q1 2026 for mass-market rollout.
Regulatory scrutiny intensifies. The U.S. Department of Labor monitors displacement effects, requiring notifications under the Worker Adjustment and Retraining Notification Act for sites with 50 or more cuts. HP commits to severance packages averaging 12 weeks’ pay plus benefits continuation.
Employee impacts ripple through Palo Alto headquarters and Austin facilities. Union representatives at the International Brotherhood of Electrical Workers push for retraining programs in AI ethics and prompt engineering. Internal memos outline upskilling for 10,000 retained staff via HP University platforms.
Competitive dynamics sharpen. Market share for AI PCs stands at 25 percent for HP, trailing Lenovo’s 28 percent but ahead of Acer’s 12 percent. Canalys forecasts the segment reaching 100 million units annually by 2027, driven by Windows 12 compatibility mandates.
Supply chain vulnerabilities persist. Reliance on TSMC for 5-nanometer chips exposes HP to geopolitical risks in Taiwan Strait tensions. Diversification efforts include new fabs in Arizona, operational by mid-2026 with 20,000 wafer starts monthly.
Innovation pipelines prioritize hybrid architectures. Upcoming Omen gaming laptops feature AMD Ryzen AI processors with 50 TOPS neural engines for ray-tracing acceleration. Enterprise servers incorporate HBM3e memory stacks, doubling bandwidth to 1.2 terabytes per second.
Economic forecasts temper recovery hopes. Goldman Sachs projects U.S. tech unemployment peaking at 4.5 percent in Q2 2026 before stabilizing. Federal investments via the CHIPS Act allocate $52 billion for domestic semiconductor production, potentially buffering future disruptions.
HP’s bold recalibration tests resilience in an AI-dominant era. Savings reinvest into R&D, targeting 15 percent of revenue by 2028. Success metrics include 20 percent faster time-to-market for silicon designs and 25 percent productivity lifts in engineering teams.
