TLDR
- IBM will lay off a low single-digit percentage of its global workforce in the fourth quarter, potentially affecting up to 3,000 employees
- US headcount is expected to remain flat year over year despite some domestic cuts
- The company reported strong third quarter results with revenue up 9% to $16.33 billion
- AI consulting bookings surged to $9.5 billion in Q3, with 80% coming from new customers
- IBM joins Amazon, Meta, and other tech companies making staff cuts while investing heavily in AI
IBM announced Tuesday it will cut thousands of jobs in the current quarter. The company characterized the layoffs as affecting a “low single-digit percentage” of its global workforce.
With 270,000 employees at the end of 2024, a 1% reduction would mean roughly 2,700 jobs lost. The company hasn’t disclosed the exact number of positions being eliminated.
A spokesperson told CNBC that while some US-based roles will be impacted, American employment levels should remain flat compared to last year. This suggests the cuts will be concentrated internationally.
The layoffs come just two weeks after IBM reported better-than-expected earnings. Revenue for the third quarter jumped 9% to $16.33 billion, beating analyst forecasts.
Software revenue alone increased 10% during the period. The strong performance met consensus expectations across the board.
Shifting Focus to AI and Cloud
IBM has been aggressively pursuing growth in artificial intelligence and cloud computing under CEO Arvind Krishna. He took the helm in 2020, replacing Ginni Rometty.
The company made its biggest strategic move in 2021 when it spun off Kyndryl. That separate company now handles traditional technology services and hardware maintenance for corporate customers.
CFO Jim Kavanaugh told analysts last month that AI adoption among mainstream corporations is starting to pick up speed. The numbers back up that claim.
AI consulting and software bookings hit $9.5 billion in the third quarter. Investment bank Jefferies called this “strong momentum in AI-driven demand.”
Perhaps more telling, roughly 80% of IBM’s AI customers over the past six months were new to the company. That suggests IBM is capturing fresh business as companies explore AI solutions.
Tech Industry Trend
IBM isn’t alone in trimming staff while chasing AI opportunities. Several major tech companies have announced cuts recently.
Amazon said in October it would eliminate 14,000 corporate positions. Meta’s AI unit cut 600 workers around the same time.
Many executives predict AI tools will boost productivity. Workers can already use AI to help with coding and other technical tasks.
But the actual payoff from AI products remains unclear. Some analysts are warning about a possible bubble in AI investments.
IBM has a history of what it calls “workforce rebalancing.” The company regularly sheds workers in some areas while hiring in others.
In March 2024, IBM let go of marketing and communications staff. Krishna told The Wall Street Journal in May that AI agents had taken over work previously done by about 200 HR employees.
The company then hired more salespeople and software developers. IBM says it’s simply moving people and skills to match where demand is heading.
The company did not reveal severance payment costs for the current round of layoffs. IBM typically doesn’t break out these charges separately.
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