HP to slash up to 6,000 jobs as component costs and AI reshape operations

HP announced plans to eliminate between 4,000 and 6,000 positions by 2028 as part of what it described as an AI-driven transformation to save $1 billion, while warning that surging memory chip costs would squeeze margins in the second half of 2026.

The job cuts will affect teams focused on product development, internal operations, and customer support, CEO Enrique Lores said during the company’s earnings call Tuesday. HP expected to incur approximately $650 million in restructuring costs, with $250 million hitting fiscal 2026.

“We expect this initiative will create $1 billion in gross run rate savings over three years,” Lores said during the call. “It’s something we have to do to make sure the company stays competitive.”

HP positioned the cuts as necessary to redesign business processes using AI. The company said it had been piloting AI applications for two years and was now moving to full deployment across product development, customer service, and operational processes.

“What we have learned is that we need to start from redesigning the process, and once we know how the process could be redone using AI, using agentic AI, it can really have a very significant impact,” Lores said during the call.

The company said it would allocate the $1 billion in savings roughly as follows: 20% toward accelerating product innovation, 40% toward improving customer satisfaction, and 40% toward boosting productivity.

Analysts question the AI narrative

While HP framed the initiative as an AI-driven transformation, analysts questioned whether the cuts were genuinely driven by AI productivity gains or more conventional cost pressures.

“HP’s latest workforce reduction appears to be driven more by cost containment than any near-term gains from artificial intelligence,” said Sanchit Vir Gogia, chief analyst at Greyhound Research. “While the company has positioned this move as part of its broader AI pivot, the financial signals suggest a more conventional story: soft PC demand, surging component prices, and margin pressure across core business lines.”

The cuts followed earlier workforce reductions at HP. In February, the company eliminated 1,000 to 2,000 employees. Before that, HP’s “Future Ready Transformation” program, launched in November 2022, ultimately affected 9,400 employees. The cumulative workforce reductions raised concerns about operational continuity

Enterprise buyers face service, pricing uncertainties

For CIOs planning hardware refreshes or managing vendor relationships, the restructuring raised questions about service levels and delivery, while memory cost pressures signaled likely price increases ahead.

Some operational issues were already surfacing at HP and other vendors undergoing similar restructuring, according to Gogia. “Some HP clients have reported slower warranty turnarounds and less predictable inventory updates since regional support teams were restructured,” he said.

“CIOs should speak with account teams to understand what’s changing, clarify who remains responsible for delivery, and revisit any support or service agreements that were signed before the restructuring began,” Gogia said.

On the cost front, HP warned during the earnings call that rising memory chip costs would impact its profitability in the second half of fiscal 2026, estimating a $0.30 per share impact even after mitigation efforts.

The company planned to address the pressures through supplier diversification, reduced memory configurations in some product lines, and price increases. “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 said during the earnings call.

Lores also added that HP had inventory on hand to cover the first half of fiscal 2026 but expected margin pressures to intensify in the latter half as that inventory depleted and current memory prices flowed through to production.

Part of broader vendor consolidation

The job cuts at HP were part of a broader pattern of workforce reductions at PC and server vendors facing similar pressures.

“Recent job cuts at HP, Dell, Lenovo, and HPE point to a longer-term shift in how these companies are choosing to operate,” Gogia said. “Many vendors are moving away from high-volume sales tactics, large product portfolios, and people-heavy support models. Instead, they are focusing on simplified offerings, centralised operations and investments in platforms built around AI, services and cloud-based delivery.”

He cautioned that the transition period could create operational challenges for enterprise buyers. “What matters now is not just a vendor’s long-term vision, but how well they hold up during transition,” Gogia said.

A request for comment to HP remains unanswered.