HP Plans Job Cuts of Up to 6,000 as It Shifts Focus to AI

HP announced on October 31, 2023, that it plans to reduce its global workforce by between 4,000 and 6,000 jobs as part of a significant restructuring initiative. This move aims to streamline operations and integrate artificial intelligence into its product development processes. The job cuts may account for up to 10% of the company’s total workforce, reflecting the evolving landscape of the technology sector.

During a media briefing, CEO Enrique Lores indicated that the reductions will primarily affect teams engaged in product development, internal operations, and customer support. The announcement came as HP’s shares fell by more than 5% in extended trading, signaling investor concerns about the company’s future direction.

HP expects that this restructuring will generate approximately $1 billion in gross run rate savings over the next three years. This strategic shift follows a previous layoff announcement in February, where the company reduced its workforce by an additional 1,000 to 2,000 employees as part of earlier restructuring efforts.

Market Trends and Financial Outlook

The demand for AI-enabled personal computers is rising, with such products representing over 30% of HP’s shipments in the fourth quarter of fiscal 2023. However, a surge in global memory chip prices, driven by increased demand from data centers, poses a potential challenge for HP and other consumer electronics manufacturers like Dell and Acer. Analysts from Morgan Stanley have cautioned that this price increase could exert pressure on profits.

Lores projected that HP will begin to feel the impacts of these cost increases in the second half of fiscal 2026. He noted that the company currently has sufficient inventory for the first half, but is adopting a cautious approach regarding future pricing strategies. “We are taking a prudent approach to our guide for the second half, while at the same time implementing aggressive actions like qualifying lower cost suppliers, reducing memory configurations, and taking price actions,” Lores stated.

For fiscal 2026, HP anticipates adjusted profit per share to range between $2.90 and $3.20, falling short of analysts’ average estimate of $3.33. The company also expects its adjusted profit per share for the first quarter to be between 73 cents and 81 cents, with the midpoint below the anticipated 79 cents.

Despite these challenges, HP reported a revenue of $14.64 billion for the fourth quarter, exceeding estimates of $14.48 billion. This performance highlights the company’s ability to navigate a competitive market, even as it prepares for a transformative shift towards artificial intelligence.