HP Inc on Tuesday confirmed a fresh round of workforce reduction, outlining plans to trim its global headcount by 4,000 to 6,000 roles by the end of fiscal 2028.
The technology giant said the move is designed to simplify operations and deploy artificial intelligence (AI) to speed up product development, improve customer service and unlock stronger productivity gains, reported Reuters.
Why the Job Cuts, Again?
Chief executive Enrique Lores acknowledged that several major divisions could see reductions, including product development, internal operations and customer support. The company is aiming to offset rising input costs and sharpen its competitiveness in a market that has grown rapidly more intelligent, but also more expensive.
“We expect this initiative will create $1 billion in gross run rate savings over three years,” Lores said, adding, “It’s something we have to do to make sure the company stays competitive.”
This is not HP’s first attempt at rightsizing. Earlier this year, the company laid off 1,000 to 2,000 employees as part of a previously announced restructuring drive. Nearly three years ago, HP had also announced a similar 4,000 to 6,000 job reduction plan that generated gross savings of $2.2 billion. At that time, the company employed 61,000 workers. As of October 2024, HP’s workforce stood at 58,000 employees.
The current restructuring will lead to approximately $650 million in charges, with $250 million expected to be absorbed in fiscal 2026, which began on Nov 1.
AI PCs: Growing Fast, Costing More
The fourth quarter, ended October 31, showcased HP’s rising reliance on AI-enabled personal computers. More than 30 per cent of its shipments in the period featured AI capabilities, signalling an accelerating consumer appetite for smarter machines. The trend has also helped AI PCs contribute over 30 per cent of HP’s total shipments in the quarter.
But soaring memory chip prices, driven by demand from data centres, are weighing on HP’s financial momentum. Analysts at Morgan Stanley have also issued industry-wide warnings that companies like HP, Dell and Acer could see margin pressure due to persistent chip cost inflation.
“For the second half, we are taking a prudent approach to our guide, while at the same time we’re implementing aggressive actions,” Lores said.
HP said it still has adequate inventory to cushion costs during the first half of this fiscal year but plans additional guardrails for the second half. The company is onboarding more memory suppliers, lowering memory components in products where not essential, raising prices when required and diversifying sourcing to reduce dependency on any single supply chain.
Earnings Take the Hit
Profits excluding restructuring charges and one-off items are expected to range between $2.90 and $3.20 per share. The company predicts Q1 earnings of 73 to 81 cents per share for the period ending January, broadly in line with current estimates.
Despite headwinds, HP delivered modest topline strength in Q4, logging a 4.2 per cent jump in sales to $14.6 billion. Adjusted profit for the quarter was 93 cents a share, slightly ahead of Street expectations that called for 92 cents a share on revenue of $14.5 billion.
The PC division rose 8 per cent during the quarter, led by upgrades to Windows 11 machines and growing interest in AI PCs with specialised chips.
Tariffs, Shifting Supply Chains & a Strategic Pivot
Like many of its peers, HP is playing a high-stakes game of geopolitical chess. The company has already transitioned nearly all North American manufacturing out of China to mitigate tariff exposure. With older PCs reaching retirement and enterprises and consumers embracing AI enhancements, HP has tailored its supply chain to prioritise agility, resilience and local market needs.
Sector-Wide Layoff Tremors
HP’s latest cuts follow broader restructuring momentum across Big Tech. Apple recently laid off dozens of employees after slicing nearly 20 positions in Australia and New Zealand. Amazon Inc announced plans to reduce 14,000 jobs globally, affecting close to 10 per cent of its 350,000 corporate employees. Reuters also noted that Amazon has eliminated roughly 30,000 positions since the pandemic hiring boom began, despite employing nearly 1.55 million workers globally.
Meta Platforms Inc has also cut several hundred roles within its AI teams.
