Gartner predicts that by 2027, 75% of organizations primarily using AI to cut costs will be surpassed by competitors reinvesting profits and may have to spend to rehire 30% of previously laid-off employees.
Gartner, a leading technology research and advisory firm, released its Gartner 2026 Hype Cycle for the Future of Work report, forecasting that by 2029, organizations will need to rehire about 30% of employees previously laid off due to AI replacing their roles, at noticeably higher costs. While downsizing teams boosts short-term profits, it severely harms the development of talent and organizational knowledge accumulation. Coupled with the global labor supply slowing, competition for skilled workers intensifies, driving up recruitment and training expenses.
Additionally, Gartner estimates that by 2027, over 75% of organizations focusing on AI solely for cost reduction will be overtaken by competitors who reinvest profits into advancing innovation, modernizing their operations, and seriously upskilling their workforce.
Tory Paulman, Vice President of Research at Gartner, stated that a major early AI mistake by executives is viewing AI’s purpose as replacing humans, whereas the real opportunity lies in empowering teams. Leaders who see AI merely as a cost-cutting tool risk excessive layoffs that undermine innovation capacity. He recommends adopting a “Talent Remix” strategy by usingAI to redefine rolesand transition employees from low-output tasks to new business opportunities instead.
The report also notes that AI investment is entering the trough of disillusionment in the Hype Cycle, making the main challenge not technology itself but leveraging AI to extend human intelligence. Gartner outlines four key transformations in working with AI:
The first transformation is forming new human-AI relationships as coworkers (AI Toolmate, Digital Coach, AI Avatar) to enhance judgment and creativity, with humans remaining accountable for final outcomes.
The second is accelerating workforce readiness for AI by training employees in digital agility, continuous learning, and cross-functional flexibility to close skill gaps.
The third is preserving human judgment and work context. Increasing AI in business processes raises risks of losing accumulated knowledge, so organizations must design decision intelligence systems that keep humans in oversight roles.
The final transformation is laying foundations for long-term compounded value by creating secure environments supporting advanced technologies like specialized AI models, embodied AI operating through physical systems, and Vibe Coding where AI writes software code.