The technology industry’s embrace of artificial intelligence has reached another inflection point. HP announced Tuesday that it will eliminate between 4,000 and 6,000 jobs worldwide as part of a sweeping restructuring designed to generate $1 billion in annual savings by fiscal 2028. Those funds will finance an aggressive push into AI systems that CEO Enrique Lores believes will perform many tasks better and faster than human employees currently do.
The announcement represents more than just another corporate downsizing. It signals a fundamental shift in how established technology companies view the relationship between automation and employment. Lores characterized the transition as an industrywide phenomenon that companies must embrace to remain competitive, suggesting HP’s approach previews broader changes coming throughout the sector.
Moving beyond experimentation
HP has moved past the pilot phase of AI implementation into targeted initiatives across multiple business areas. The company is deploying AI agents that automate entire processes, using artificial intelligence to assist software development, and implementing systems that accelerate various operations. Lores emphasized that the strategy extends far beyond simple chatbots, encompassing sophisticated automation that fundamentally changes how work gets done.
The shift means tasks once requiring human judgment and manual execution are increasingly being transferred to AI systems. HP expects this transformation will improve customer satisfaction, speed product development, and boost internal productivity. Yet the company acknowledges the human cost, planning to spend roughly $650 million on restructuring, including approximately $250 million in fiscal 2026 alone.
Mixed financial results cloud the vision
The ambitious AI announcement arrived alongside quarterly results that failed to impress investors. Fourth quarter revenue rose 4.2 percent to $14.6 billion, falling short of the $14.8 billion analysts anticipated. Adjusted earnings per share declined 3 percent to 93 cents, matching expectations but hardly inspiring confidence.
The stock initially climbed more than 2 percent Tuesday before tumbling as much as 5 percent in Wednesday premarket trading. Shares have dropped roughly 17 percent over the past year, a stark contrast to the S&P 500’s 15 percent gain during the same period. The divergence suggests investors remain skeptical about HP’s ability to execute its transformation successfully.
PC gains cannot offset printing struggles
HP’s Personal Systems division, which manufactures computers, provided the quarter’s brightest spot. Revenue increased 8 percent to $10.4 billion, boosted by customers upgrading from Windows 10 as Microsoft ends support for the aging operating system. Unit sales rose 7 percent, reflecting solid demand in the PC market.
The printing segment told a grimmer story. Revenue fell 4 percent to $4.3 billion, with supplies dropping 4 percent and hardware units plummeting 12 percent. The continuing decline in printing underscores how rapidly consumer and business habits are shifting away from physical documents, creating structural headwinds that AI investment alone cannot solve.
Analyst concerns about timing
Wall Street analysts expressed doubts about whether HP’s AI savings will materialize quickly enough to offset mounting challenges. JPMorgan downgraded the stock to neutral, arguing the company is exiting the favorable portion of the PC cycle and entering a relatively tougher environment. The firm expects PC shipments to rise 6.6 percent in 2025 but fall 2.2 percent in 2026 as the Windows 10 replacement boom fades.
Rising memory costs pose another threat. Bank of America estimates that increasing DRAM and NAND prices could hit HP’s gross margin by 120 basis points, damage operating margin by 103 basis points, and drag earnings per share down by 46 cents next year from memory inflation alone. These near term pressures create a difficult backdrop for a transformation that won’t deliver most of its $1 billion in savings until late in the decade.
Betting on long term transformation
HP projects between $2.8 billion and $3 billion in free cash flow for 2026 and maintains that its AI productivity plan will strengthen the business over time. Lores remains confident in the strategy, emphasizing the importance of staying at the leading edge of new technologies to transform work processes and maintain competitiveness.
Whether that transformation justifies eliminating thousands of jobs while financial results disappoint will depend on execution HP has yet to prove it can deliver.