The PC giant bets big on artificial intelligence to drive future growth—but rising chip costs and weaker earnings guidance unsettle investors.
MARKET INSIDER – HP Inc. has unveiled one of its most sweeping restructurings in years, announcing plans to cut between 4,000 and 6,000 jobs worldwide by fiscal 2028 as it accelerates a company-wide shift toward artificial intelligence. The move marks a decisive attempt by the Silicon Valley stalwart to streamline operations, speed up product development, and offset mounting cost pressures in a tech landscape increasingly dominated by AI-driven competition.
Shares of the Palo Alto-based company fell 5.5% in after-hours trading as CEO Enrique Lores outlined the plan, which targets teams involved in product development, internal operations and customer support. Lores said the initiative is expected to generate $1 billion in gross run-rate savings over three years—savings HP argues are necessary as it pivots toward next-generation AI-enabled PCs and services. The cuts follow an additional 1,000 to 2,000 layoffs in February under an earlier restructuring program.
AI has quickly become central to HP’s strategy. More than 30% of the company’s PC shipments in the fourth quarter were AI-enabled, reflecting surging demand as enterprises and consumers seek devices capable of advanced on-device processing. But the shift comes with complications: a global spike in memory chip prices—driven by Big Tech’s race to expand AI data centers—is expected to squeeze margins at hardware makers such as HP, Dell and Acer. Morgan Stanley analysts have warned that soaring DRAM and NAND costs could erode profitability across the consumer electronics sector.
Lores acknowledged the looming pressure, saying HP expects to feel the full impact of higher chip prices in the second half of fiscal 2026. While the company has enough inventory to shield the first half, it is taking “aggressive actions” such as qualifying lower-cost suppliers, reducing memory configurations and adjusting product pricing to preserve margins.
The financial outlook remained cautious. HP forecast fiscal 2026 adjusted earnings of $2.90 to $3.20 per share—well short of analysts’ expectations of $3.33. Its first-quarter adjusted profit forecast of 73 to 81 cents per share also came in soft at the midpoint. Still, the company posted fourth-quarter revenue of $14.64 billion, slightly beating estimates.
As HP doubles down on AI while shrinking its global workforce, investors are left weighing a critical question: can the company’s bold transformation deliver long-term competitiveness, or will rising hardware costs and muted profit growth dull the impact of its next big pivot?
