IBM to Cut Thousands of Jobs as It Refocuses on High-Margin Software and AI Growth

IBM said on Tuesday that it will cut a portion of its global workforce this quarter, as the company deepens its pivot toward high-margin software and cloud businesses powered by artificial intelligence. The company described the move as a “low single-digit percentage” reduction of its roughly 270,000 employees, signaling that several thousand roles could be affected.

In a statement, IBM said it “routinely reviews” its workforce and “at times rebalances accordingly.” The company added that “in the fourth quarter we are executing an action that will impact a low single-digit percentage of our global workforce.” While the exact locations and roles affected were not disclosed, some U.S. positions may be part of the cuts, though overall employment in the country is expected to remain largely unchanged year over year.

The restructuring underscores IBM’s determination to streamline operations and channel more investment into areas that promise stronger growth and profitability. Under CEO Arvind Krishna, IBM has spent the past several years shedding legacy businesses and doubling down on software and hybrid-cloud services, particularly through its Red Hat division. The shift is central to the company’s strategy to tap into rising enterprise demand for AI-driven cloud platforms, automation tools, and data management solutions.

However, the transformation has not been without challenges. IBM reported a slowdown in its key cloud software segment last month, raising concerns among investors who had bet on the company’s ability to capture a larger share of the AI and cloud boom. 

Despite the near-term turbulence, IBM continues to position itself as a major player in the global race to commercialize AI and cloud technologies. The company’s leadership has pointed to a growing “AI book of business,” reflecting strong demand from enterprises seeking to integrate generative-AI tools into their workflows. 

Investors expect sustained revenue growth from AI and software, but IBM must manage this transition without undermining employee morale or operational stability. The latest workforce reduction follows similar actions by other technology firms that are refocusing on AI-centric growth, even as they trim costs in less profitable divisions. The shift mirrors broader trends across the tech industry, where companies are racing to reallocate talent toward cloud computing, data engineering, and generative-AI initiatives.

For Krishna, who has led IBM since 2020, the layoffs reflect both opportunity and risk. The company’s bet on hybrid-cloud and AI is strategically sound, given the long-term shift in enterprise spending, but the timing of the workforce changes highlights the pressure to deliver near-term efficiency gains. IBM’s pivot is also a test of its ability to reinvent itself in an era when legacy tech giants are being forced to evolve or risk irrelevance.

While the scale of the reductions remains modest in percentage terms, the cuts carry symbolic weight: IBM is betting its future on software, data, and AI, even as it trims headcount in other parts of the business. As enterprises increasingly migrate to cloud-based solutions and automated workflows, IBM’s long-term success will depend on whether it can translate its deep technical legacy into sustained innovation and growth.