IBM to cut thousands of jobs as Red Hat growth slows

IBM will cut a “low single-digit percentage” of its 270,000-strong workforce in the fourth quarter, the company said Tuesday. The reduction could affect between 2,700 and 5,400 employees if there is an employee reduction of just 1% or 2%.

“We routinely review our workforce through this lens and at times rebalance accordingly. In the fourth quarter we are executing an action that will impact a low single-digit percentage of our global workforce,” an IBM spokesperson said.

IBM said that US employment will remain “flat year over year,” suggesting the company will backfill domestic roles in other geographies. The company currently lists 2,466 job openings in India compared to 370 in the US, according to its Careers portal.

This marks IBM’s third major workforce reduction since September 2024, when the company eliminated an estimated 8,000 to 10,000 positions. Another 5,000 to 7,000 positions were cut in March 2025.

Slowing growth in a key software business

The timing of the cuts is notable. Three weeks before announcing the layoffs, IBM reported slowing growth in Red Hat, its highest-margin hybrid cloud business, and the centerpiece of CEO Arvind Krishna’s transformation strategy.

IBM’s third-quarter earnings report on October 22 showed software revenue growth of 10% to $7.2 billion. Within that segment, the Red Hat hybrid cloud unit grew 14%, down from 16% in the prior quarter. Analysts had expected 16% growth.

Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, said the deceleration reflects internal execution challenges. “This shift exposes delivery strain inside a business unit expected to move faster than it currently does,” Gogia said. “While enterprise clients continue to view IBM as a dependable partner in complex environments, the way hybrid cloud is bought and measured has changed. Organisations are no longer buying platforms in isolation. They are buying the ability to act quickly.”

Red Hat is central to CEO Arvind Krishna’s strategy to shift IBM toward higher-margin software and cloud services. During the earnings call, Krishna said he expects Red Hat to return to “mid-teen percentage growth, or close to that level, entering 2026.”

Streamlining for efficiency

Gogia said the workforce reduction is designed to streamline operations rather than signal financial distress. “Over the past year, IBM has redesigned more than seventy internal workflows through automation and AI, creating the space to reduce headcount without cutting capacity where it matters most,” he said. “From what we have observed, engineering and delivery teams remain protected.”

The cuts aim to reduce internal complexity, Gogia said. “These decisions are designed to reduce internal complexity and channel effort into the parts of the business with the clearest return. This is not about shrinking the company. It is about shaping it to scale more effectively.”

However, execution issues remain a concern. “In many client settings, the technology is not the issue. It is how IBM’s internal teams pass work between groups that slows things down,” Gogia said. “This becomes especially visible in deployments that cross product lines, such as OpenShift tied to AI models or hybrid data orchestration.”

Increased client oversight recommended

The combination of workforce cuts and internal execution challenges is prompting analysts to advise closer monitoring of IBM engagements.

Greyhound Research is advising clients to increase oversight of IBM delivery operations during the reorganization.

“We are advising CIOs to step in early and request formal documentation around coverage, support depth, and continuity of leadership across their accounts,” Gogia said. “In recent months, we have seen examples where IBM’s internal transitions slowed deployment, not because of missing capability, but due to unclear ownership between business units.”

The issue typically affects projects that cross organizational boundaries, such as deployments that combine Red Hat with consulting services or blend software delivery with infrastructure planning.

IBM’s internal structure is still adjusting, Gogia said. “During this time, it is essential for clients to clarify who is accountable for each phase of delivery and to lock those roles in place across the full term of execution. This is not a sign of instability. It is a normal stage in any large-scale realignment. But it does require CIOs to shift from passive trust to active engagement.”

CIOs should validate support agreements and establish clear accountability for each phase of delivery. Organizations should also clarify how the workforce changes affect product roadmap timelines, particularly for implementations of IBM’s watsonx AI platform, Gogia added. “The coming months will need to show that the reshaped teams can respond faster, maintain roadmap delivery, and carry client work forward without hesitation,” Gogia said. “If that happens, the decision will be seen not as a cost cut, but as an investment in operational clarity.”