Overview:
- HP has announced plans to diminish its global workforce by an estimated 4,000 to 6,000 employees by the conclusion of fiscal year 2028, as disclosed by the technology firm on Tuesday.
- This strategic workforce reduction is part of a broader initiative aimed at enhancing “customer satisfaction, product innovation, and productivity through the integration of artificial intelligence,” noted the Palo Alto, California-based manufacturer of personal computers and printers in its press statement.
- The anticipated layoffs are projected to yield “gross run rate savings” of approximately $1 billion by the end of fiscal 2028, as per the company’s announcement. Additionally, HP anticipates incurring about $650 million in labor and non-labor expenses related to restructuring and other financial commitments, including an estimated $250 million in fiscal 2026.
Industry Context:
HP is among a cadre of prominent technology firms instituting significant reductions in their workforce this year, driven by escalating investments in artificial intelligence.
A recent study by Economist Impact, a research entity associated with the Economist Group, revealed that 42% of financial executives perceive headcount reduction as the most straightforward approach to realizing returns from AI expenditures.
Conversely, a nearly equal segment (43%) contests this view, suggesting that such layoffs represent a limited and potentially myopic strategy.
According to outplacement firm Challenger, Gray & Christmas, U.S. employers disclosed a staggering 153,074 job cuts in October—reflecting a 175% increase from the same month last year, largely attributed to automation driven by artificial intelligence.
Among private-sector entities, cost reductions emerged as the predominant rationale for layoffs in October, culminating in 50,437 announced terminations. AI was cited as a contributing factor in 31,039 job cuts, with technology-related layoffs totaling 48,414 during the first ten months of the current year.
The layoff announcement surfaced concurrently with HP’s fiscal 2025 fourth-quarter earnings report, which concluded on October 31. The company reported total revenues of $55.3 billion for the quarter, reflecting a 3.2% increase compared to the previous year.
“Our Q4 and FY 2025 outcomes demonstrate robust performance amidst challenging market dynamics, featuring a consistent progression as promised during the latter half of the year,” commented HP CFO Karen Parkhill during Tuesday’s earnings conference call.
According to the CFO, revenue from AI-enhanced PCs has doubled year-over-year. Looking ahead, the technology titan discerns “substantial opportunities” to integrate AI across its operations to heighten productivity, foster innovation, and enhance customer experience,” Parkhill elaborated.
Simultaneously, the company is contemplating “aggressive measures,” including price hikes, to contend with rising inflationary pressures, as indicated by HP CEO Enrique Lores during the earnings call.
“Currently, memory expenses constitute 15% to 18% of the cost of a typical PC. Although a rise was anticipated, the acceleration in this rate has been pronounced in recent weeks,” he remarked.
Source link: Cfodive.com.
