Quick Overview

  • IBM said on Tuesday that it plans to cut thousands of jobs in the fourth quarter. Although the global workforce will shrink by a "low single-digit percentage," the company expects its U.S. headcount to remain flat year over year. According to IBM's latest annual report, the company had 270,000 employees worldwide as of December 2024.
  • In an emailed statement, IBM said: "IBM's workforce strategy is driven by having the right skills to meet client needs. We regularly review our workforce through this lens and rebalance as appropriate."
  • The layoffs come as IBM further focuses on its two business segments—software and infrastructure—which were the fastest-growing divisions in the third quarter, to support rising demand for AI services.

In-Depth Analysis

IBM is the latest in a series of major tech companies to announce workforce reductions amid continued growth in enterprise AI spending.

Last week, AWS cut 14,000 jobs globally and cited AI as a contributing factor in the restructuring. Microsoft has laid off about 15,000 employees this year, including two larger waves in May and July, in response to changing market dynamics.

For its part, IBM has been optimistic about how AI will affect its workforce size. In 2023, CEO Arvind Krishna said in an interview with Bloomberg that the company had paused hiring for back-office roles that could be filled by AI and automation, estimating these roles at nearly 8,000. Krishna later clarified that these comments did not imply layoffs but rather natural attrition over the coming years.

IBM expects demand for business-to-business enterprise AI services to continue rising and is betting on its broad portfolio to attract customer spending.

"We believe we have a differentiated competitive value proposition—a company with an integrated technology stack, plus strategic partner AI, and a scaled consulting business, as a core part of IBM's client zero, driving unique use cases and client references," said IBM Senior Vice President and Chief Financial Officer James Kavanaugh during the company's third-quarter earnings call earlier this month.

Kavanaugh also highlighted that the company has had more than 1,000 generative AI client projects across enterprise, software, and consulting segments so far this fiscal year.

IBM has been ramping up its AI tool releases. Last month, the company launched a "vibe coding" tool called Project Bob, featuring automated testing and security capabilities. Additionally, IBM is working to expand agentic AI integrations and develop small language models for on-premises and edge scenarios to meet enterprise needs.