HP is betting $1 billion on AI, even if it means cutting thousands of jobs, says CEO

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HP is betting $1 billion on AI, even if it means cutting thousands of jobs, says CEO

companies :: Updated on 2025-11-26 :: source - yahoo finance

By Francisco Velasquez

HP Inc. (HPQ) is doubling down on artificial intelligence — and betting it will replace thousands of jobs in the process.

"There are many things that today we have to do using people ... that in the future AI will do better and will do faster," CEO Enrique Lores told Yahoo Finance (video above).

It's not just an HP issue, he added, but an "industrywide" shift companies must embrace to stay competitive.

That transformation is reshaping HP. The company on Tuesday unveiled a sweeping AI initiative tied to new restructuring efforts. HP expects to eliminate 4,000 to 6,000 jobs globally and generate $1 billion in annualized savings by fiscal 2028.

"We're moving from pilots to specific initiatives across multiple areas," Lores said, noting AI is accelerating product development, improving customer satisfaction, and boosting internal productivity.

Lores emphasized that HP's AI approach goes far beyond chatbots, with efforts that include AI agents that automate processes, AI-assisted software development, and systems that accelerate operations.

The through line: Tasks once handled manually are increasingly being handed over to AI systems.

HP expects to spend roughly $650 million on restructuring, including about $250 million in fiscal 2026.

An Iranian man looks on as he stands behind a logo of the HP American company at the Paytakht computer centre in northern Tehran on December 2, 2021. MORTEZA NIKOUBAZL/NurPhoto (Photo by Morteza Nikoubazl/NurPhoto via Getty Images)

But the ambitious AI plan did not distract from what was ultimately a mixed quarter.

Fourth quarter revenue rose 4.2% to $14.6 billion, slightly below the $14.8 billion analysts expected, according to Bloomberg data. Adjusted EPS fell 3% to $0.93, in line with estimates.

The stock was up more than 2% in Tuesday trading before falling as much as 5.5% in after-hours action after its earnings release. Shares remain down roughly 17% over the past 12 months, compared with a 15% gain for the S&P 500 (^GSPC).

Personal Systems — HP's PC business — was a bright spot, with revenue up 8% to $10.4 billion, helped by Windows 10's end-of-life upgrade cycle. Units rose 7%.

The printing segment continued to slide. Revenue fell 4% to $4.3 billion; supplies dropped 4% and hardware units fell 12%.

JPMorgan's Samik Chatterjee downgraded the stock to Neutral, arguing HP is leaving the "favorable" part of the PC cycle and entering a "relatively tougher environment."

He expects PC shipments to rise 6.6% in 2025 but fall 2.2% in 2026 as the Windows 10 replacement boom fades.

Rising DRAM and NAND costs could deepen the hit. Bank of America's Wamsi Mohan estimates HP faces a 120-basis-point gross margin hit, a 103-basis-point operating margin hit, and $0.46 EPS drag next year from memory inflation alone.

That means HP's AI savings may not arrive quickly enough to offset a rough 2026.

HP expects $2.8 billion to $3 billion in free cash flow in 2026 and says its AI productivity plan will strengthen the business long term. But most of the $1 billion in savings won't materialize until late in the decade.

Regardless, Lores is bullish on the makeover. "It's important to be in the leading front, embrace these new technologies, transform how we work so we can stay competitive in the future," he said.

Francisco Velasquez is a Reporter at Yahoo Finance. Follow him on LinkedIn, X, and Instagram. Story tips? Email him at francisco.velasquez@yahooinc.com.