IBM is embarking on the next phase of its strategic transformation with the announcement of job cuts this quarter. The company confirmed that the layoffs will involve a low single-digit percentage of the global workforce, which, with a headcount of around 270,000 at the end of 2024, could mean thousands of positions eliminated.
The move is directly linked to CEO Arvind Krishna’s strategy to transform IBM into a company focused on high-margin software and hybrid cloud and artificial intelligence solutions. Acquired Red Hat plays a key role in this.
However, this routine workforce review, as the company calls it, comes at a troubling time. Wall Street has been keeping a close eye on IBM’s ability to monetise demand for AI-linked cloud services, yet the giant reported a worrying slowdown in growth in its key cloud software segment last month. This wake-up call has made investors nervous.
Although the company’s shares have risen by more than 35% this year, the news of the cuts, originally revealed by Bloomberg News, resulted in a nearly 2% drop in the stock price.
IBM stresses that this is not about cutting costs, but about ‘rebalancing’ resources. The company points out that while some US employees will be affected by the reductions, overall US staffing levels are expected to remain stable on an annual basis. This suggests an active transfer of funds from redundant departments to hire new professionals in growth areas such as AI and software development. Nonetheless, the reductions show how much pressure IBM is under to prove that its bet on the cloud and AI is delivering.
