HP Inc. announced a significant restructuring that includes reducing its global workforce by 4,000 to 6,000 positions by fiscal year 2028. This move is part of a broader strategy to streamline operations and integrate artificial intelligence more deeply into product development and customer service. The company expects these initiatives to generate substantial savings over the coming years.
Key Takeaways
- HP expects to cut 4,000 to 6,000 jobs by fiscal 2028.
- Job reductions aim to streamline operations and leverage AI.
- The company anticipates $1 billion in gross run rate savings over three years.
- Demand for AI-enabled PCs is growing, impacting HP's shipments.
- Memory chip price surges could pressure future profits.
Strategic Shift Towards AI and Efficiency
The planned job cuts will affect various departments, including product development, internal operations, and customer support. CEO Enrique Lores stated that these changes are crucial for HP to adapt to an evolving technological landscape. The company is focusing on using AI to enhance productivity and improve customer satisfaction across its offerings.
This initiative follows a previous restructuring. Earlier this year, HP laid off between 1,000 and 2,000 employees as part of an ongoing effort to optimize its workforce. The current plan builds on these foundational changes, aiming for a more agile and AI-driven operational model.
Quick Fact
HP expects to achieve $1 billion in gross run rate savings over the next three years through these streamlining efforts and AI adoption.
Growing Demand for AI-Enabled Devices
The market for AI-enabled personal computers is expanding rapidly. HP has observed a significant increase in demand for these advanced devices. In the fourth quarter, which ended October 31, over 30% of HP's total shipments were AI-enabled PCs. This trend highlights a clear shift in consumer and business preferences towards more intelligent computing solutions.
This growing demand is a key driver behind HP's strategic focus on AI. By embedding AI into its core operations and products, the company aims to capitalize on this market shift. The goal is to deliver more innovative and efficient products that meet modern user expectations.
"We expect this initiative will create $1 billion in gross run rate savings over three years," CEO Enrique Lores commented during a recent media briefing.
Navigating Memory Chip Price Increases
Despite the positive outlook for AI-enabled products, HP faces challenges from the global memory chip market. Analysts from Morgan Stanley have warned of a potential surge in memory chip prices. This increase is driven by high demand from data centers, particularly those supporting AI infrastructure.
This price surge could impact the profitability of consumer electronics manufacturers, including HP, Dell, and Acer. HP anticipates feeling the effects of these higher prices in the second half of fiscal 2026. The company currently holds sufficient inventory to cover its needs for the first half of the year.
Market Context
The push by major tech companies to build extensive AI infrastructure has led to increased prices for dynamic random access memory (DRAM) and NAND memory chips. These are critical components for servers and consumer electronics alike.
Mitigating Cost Pressures and Future Outlook
To counter the rising costs of memory chips, HP is implementing several aggressive actions. These include qualifying lower-cost suppliers, reducing memory configurations in some products, and adjusting pricing strategies. The company is taking a prudent approach to its financial guidance for the latter half of fiscal 2026.
For fiscal 2026, HP projects an adjusted profit per share between $2.90 and $3.20. This forecast is slightly below the average analyst estimate of $3.33. For the first quarter, the company expects an adjusted profit per share between 73 cents and 81 cents. The midpoint of this range falls just below the estimated 79 cents per share.
- Qualifying new, lower-cost suppliers.
- Reducing memory configurations in certain product lines.
- Implementing strategic price adjustments.
In the fourth quarter, HP reported revenue of $14.64 billion, surpassing analyst estimates of $14.48 billion. This strong revenue performance provides a foundation as the company navigates its restructuring and market challenges. The focus remains on strategic investments in AI and operational efficiency to secure long-term growth and profitability.