AI arrives: HP cuts thousands of jobs

HP, the well-known computer and printer maker, recently dropped a bit of a bombshell: they're planning to cut between 4,000 and 6,000 jobs by fiscal 2028. That's about 10% of their global workforce, which is a pretty significant shake-up.

The news, announced on a Tuesday in November, caused their shares to dip by 5.5% in extended trading. It seems investors get a bit jittery when companies talk about such large-scale restructuring.

Why the Big Change at HP?

So, what's behind this massive workforce reduction? HP's CEO, Enrique Lores, made it clear during a media briefing: the company is pivoting hard towards artificial intelligence. This isn't just about cutting costs, though they do expect to save a tidy US$1 billion in gross run rate over three years. It's really about driving innovation and improving customer satisfaction in an increasingly AI-driven market.

Essentially, HP is betting big on AI to boost efficiency across the board. This means that teams involved in product development, internal operations, and even customer support will feel the impact. It's a strategic move to reallocate resources and align with the rapid advancements in AI technology. We've seen similar shifts across the tech industry, with many giants like Google, Microsoft, and Amazon also trimming staff to focus on AI initiatives. It's becoming a common story, isn't it, how AI is set to revolutionise recruitment in Singapore and elsewhere?

The AI Effect on Jobs

This isn't the first time HP has downsized. They actually laid off another 1,000 to 2,000 employees earlier, in February, as part of a previous restructuring plan. It highlights a growing trend: as AI becomes more sophisticated, certain roles are becoming automated. Industry analysts are pointing out that AI automation particularly affects areas like customer support, content moderation, data entry, and even some computer programming tasks.

We expect this initiative will create US$1 billion in gross run rate savings over three years," Lores stated.

It's a stark reminder that while AI creates new opportunities, it also fundamentally changes existing job landscapes. We're seeing more and more how AI is becoming an everyday assistant, as explored in discussions around Gemini 3: Your Everyday AI Assistant Arrives.

The AI PC Boom and Chip Shortages

On the flip side, HP is seeing a huge demand for AI-enabled PCs. These make up over 30% of their shipments now, which is quite impressive. However, there's a potential fly in the ointment: memory chip prices are surging. This is largely due to the massive demand from data centres as Big Tech pours billions into building out AI infrastructure. We've seen companies like Google and Meta in £multi-billion talks for AI-related investments, driving up the costs of essential components like dynamic random access memory (DRAM) and NAND chips.

Morgan Stanley analysts have warned that this global memory chip price hike could really squeeze profits for consumer electronics makers. HP is preparing for this, with Lores mentioning they expect higher price increases in the second half of fiscal 2026. They're taking a "prudent approach" by looking for lower-cost suppliers and even reducing memory configurations to mitigate the impact. It's a delicate balancing act between meeting demand for AI-powered devices and managing rising component costs.

Financial Outlook

Despite beating revenue estimates for the fourth quarter, bringing in US$14.64 billion against expectations of US$14.48 billion, HP's financial predictions are a bit conservative. They're forecasting an adjusted profit per share between US$2.90 and US$3.20 for fiscal 2026, which is a bit lower than the US$3.33 analysts had hoped for. For the first quarter, they're expecting adjusted profit per share to be between 73 cents and 81 cents, with the midpoint also falling below estimates.

This cautious outlook likely reflects the anticipated impacts of both the restructuring costs and the rising chip prices. It shows that even with a strong pivot to AI, there are significant operational and market challenges to navigate. This trend of companies adapting to the AI boom, sometimes with a touch of "irrationality" as the Google boss put it, is something we're seeing across the industry. For a deeper look at the AI market's growth and impact, the McKinsey 2025 AI Report is a fantastic resource, outlining projected shifts and challenges across sectors McKinsey & Company.