IBM Cuts Thousands of Jobs While Pivoting Toward High-Margin Software and AI Cloud Services

IBM currently employs approximately 270,000 employees worldwide as of late 2024.

On Tuesday, IBM announced plans to reduce its workforce this quarter, potentially affecting thousands of employees as the company redirects its focus toward the high-margin software segment. This strategic shift comes as Wall Street closely monitors IBM's capacity to capitalize on artificial intelligence-driven cloud demand.

The company released a statement saying, "We routinely review our workforce and rebalance accordingly when necessary." IBM further clarified that "in the fourth quarter we are executing an action that will impact a low single-digit percentage of our global workforce."

Under the leadership of CEO Arvind Krishna, IBM has intensified its investment in software to leverage increased spending on cloud services through its "Red Hat" division, as businesses increasingly integrate artificial intelligence technology into their operations.

However, last month IBM reported a deceleration in growth within its crucial cloud software segment, raising concerns among investors who have placed significant bets on Big Blue's ability to benefit more substantially from the surging demand for cloud services.

IBM's shares, which have appreciated over 35% this year, experienced a decline of nearly 2% on Tuesday.

While some U.S. workers may be affected by these job reductions, IBM stated that employment figures within the country are expected to remain approximately the same year over year.