According to DCD, IBM is planning to cut thousands of jobs in the fourth quarter of 2025, affecting a “low single-digit percentage” of its global workforce. With around 270,000 employees at the end of 2024, this translates to potentially thousands of positions being eliminated. The cuts come despite IBM reporting $16.3 billion in Q3 2025 revenue, which was up nine percent year-over-year. The company’s software segment brought in $7.2 billion while infrastructure contributed $3.6 billion. Following the earnings call, IBM shares dropped around five percent and haven’t recovered yet. The job reductions are part of IBM’s strategic move to focus more heavily on its software business and capitalize on AI and cloud growth opportunities.
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The software pivot continues
Here’s the thing about IBM’s latest move – it’s not exactly surprising when you look at their recent trajectory. They’ve been slowly but steadily shifting away from their legacy hardware roots for years now. But cutting thousands of jobs to double down on software? That’s a pretty aggressive statement about where they see the real money being made.
Their Q3 numbers tell an interesting story. Software brought in $7.2 billion while infrastructure – their traditional strength – only managed $3.6 billion. And that infrastructure number was actually up 17% year-over-year, which makes you wonder why they’re not leaning into that growth. The answer probably lies in margins and long-term positioning. Software generally offers better profitability than hardware, and with AI becoming the new battleground, IBM wants to be ready to compete.
The cloud problem nobody’s talking about
Now let’s talk about that hybrid cloud performance. It grew 14% but missed the expected 16% – and that’s including Red Hat, which was supposed to be their cloud crown jewel. Then there were those cloud outages affecting 10 regions in Q3. Sure, they fixed it within two hours, but when you’re trying to convince enterprises to trust you with their critical infrastructure, reliability is everything.
Basically, IBM is facing the classic innovator’s dilemma. Their legacy businesses are still producing revenue, but the growth is in areas where they’re struggling to keep pace with more agile competitors. The job cuts suggest they’re willing to make painful decisions to stay relevant. But will trimming workforce while dealing with cloud reliability issues actually help them compete against AWS, Azure, and the rest of the cloud giants?
What this means for Big Blue
So where does this leave IBM? They’re betting big that software and AI will carry them through the next decade. The job cuts, while painful for those affected, are likely just the beginning of a broader restructuring. They’ve got the cash flow from their existing businesses to fund this transition, but the clock is ticking.
The real question is whether IBM can actually out-innovate in the software space. They’ve got Watson and other AI initiatives, but so does everyone else. And with cloud growth already lagging expectations, the pressure is on to deliver results that justify these workforce reductions. It’s a high-stakes gamble for a company that’s been trying to reinvent itself for the better part of two decades.
