IBM layoffs 2025: Why 8,000 jobs are reportedly being cut as AI replaces legacy roles

IBM, the 113-year-old technology titan, is reportedly laying off approximately 8,000 employees across various business units in the United States, according to an exclusive by The Register. The sweeping job cuts—spanning Cloud Classic operations, consulting, sales, CSR, cloud infrastructure, and internal IT—signal not just a financial belt-tightening but a decisive pivot in strategy. Rather than reacting to a crisis, International Business Machines Corporation appears to be accelerating its shift toward AI-powered operations and hybrid cloud services. The scale and breadth of this restructuring effort position it as one of the most significant tech workforce recalibrations of 2025.

Why Is IBM Cutting Thousands of Jobs Now?

This latest move from IBM arrives at the intersection of rising automation capabilities and intensified competition in cloud infrastructure. Industry analysts view the layoffs not as a retreat but as a recalibration. IBM’s legacy businesses, especially Cloud Classic and support-heavy consulting operations, have been underperforming relative to competitors like Amazon Web Services, Microsoft Azure, and Google Cloud Platform.

With automation, especially in HR and internal functions, reaching operational maturity, IBM is looking to trim layers of human-managed workflows. Executives reportedly greenlit these cuts as part of an internal review aimed at rebalancing headcount toward engineering, cloud architecture, and AI workload deployment. The affected units—many focused on backend operations and non-revenue-generating roles—are likely to be replaced, at least in part, by IBM’s internal deployment of Watsonx AI tools.

The broader backdrop is that IBM’s leadership wants to ensure that its $100+ billion transformation into a hybrid cloud and AI software player isn’t weighed down by legacy cost structures. This workforce reduction is seen as an operational maneuver to clear bandwidth for growth-aligned investments.

Which IBM Divisions Are Most Affected by These Layoffs?

Based on the Register report, the cuts appear concentrated in IBM’s “Cloud Classic” division—an older generation of its cloud services portfolio that predates Red Hat‘s integration and the launch of OpenShift-based hybrid models. This segment, once touted as IBM’s answer to the early cloud wave, has seen waning demand as customers migrate to containerized, Kubernetes-native platforms.

Additionally, internal teams tied to HR operations, payroll processing, and CSR initiatives are being phased out or automated. Experts point to the integration of Watsonx AI and robotic process automation (RPA) tools as a key enabler here, particularly for roles handling onboarding, compliance, and internal support.

The sales and consulting arms—traditionally headcount-heavy—are also reportedly under review. As IBM refocuses on scalable, productized solutions with low human overhead, it is reducing dependence on labor-intensive, bespoke consulting engagements. The CIO division, which supports IBM’s internal systems and digital workflows, is also being downsized—suggesting a centralization or automation of IT operations.

What Are the Financial and Strategic Drivers Behind This Workforce Reduction?

In 2024, IBM posted annual revenues of approximately $61.8 billion, with cloud and AI services contributing nearly half of that total. While margins in the consulting business have remained thin, operating income from hybrid cloud and Red Hat-based services has shown consistent upward momentum. IBM’s full-year EPS stood at $9.45 in FY24, with operating margins around 15.4%.

Executives have made no secret of their desire to boost that margin closer to 17–18% by 2026. These layoffs—targeted at functions seen as cost centers—are expected to help optimize IBM’s SG&A (selling, general, and administrative) ratio, bringing it closer to peers like Oracle and Microsoft.

The layoffs also represent a shift in human capital allocation: from overhead-heavy departments to growth engines. Internal budgeting for 2025 reportedly earmarks increased headcount for AI product development, Watsonx client engineering, and cybersecurity sales teams, suggesting the company is not contracting, but evolving.

How Has the Market Reacted to IBM’s Reported Layoffs?

Despite the grim headlines, IBM’s share price has held steady. As of May 27, 2025, IBM stock trades at $262.78, reflecting a mild 0.02% gain from the previous session. This relative calm suggests institutional investors see the layoffs as part of a longer-term cost optimization strategy rather than a reactive move to revenue shortfall.

Preliminary analysis of fund flows shows steady activity from long-only institutions, with some hedge funds trimming exposure to consulting-heavy segments of IBM’s business. Options activity suggests guarded optimism, with increased call volumes for June and July expirations around the $270–275 strike prices—implying a bet on post-restructuring upside.

Buy-side analysts from Bernstein and Credit Suisse have issued neutral to mildly bullish updates, citing improved margin visibility and stronger strategic focus as positives. However, they caution against over-exuberance until IBM shows clearer topline acceleration from AI and hybrid cloud products.

How Does IBM’s Workforce Reduction Compare to Other Tech Layoffs in 2025?

IBM is hardly alone in recalibrating its workforce. The first half of 2025 has seen mass job cuts across multiple tech giants, as companies double down on AI and trim fat from pre-pandemic expansions. Meta Platforms laid off 3,500 workers in April, mostly from its AR/VR hardware and recruitment arms. Salesforce eliminated 4,000 roles globally in a restructuring that impacted go-to-market teams and marketing functions. Meanwhile, Oracle scaled back support staff and legacy cloud operations in favor of AI-driven autonomous database offerings.

What makes IBM’s layoffs distinct is the underlying AI-centric operational shift. The decision to automate HR, CIO, and CSR workflows using internal AI tools mirrors what IBM has long preached to clients—reduce cost through intelligent automation. In that sense, IBM is now becoming its own case study.

What Does the Future Hold for IBM After the Layoffs?

The company’s ability to extract growth from Watsonx, Red Hat OpenShift, and its hybrid cloud service stack will define how this workforce realignment is judged. If these initiatives drive higher recurring revenue, improved customer stickiness, and faster go-to-market cycles, the layoffs may be remembered as a necessary reinvention.

Sources suggest that IBM is actively hiring in AI security, cloud orchestration, and industry-specific solution architecture—particularly in financial services, government, and telecom sectors. This suggests the company is pursuing a zero-sum reallocation of talent: remove redundancy in slow-growth divisions to fund aggressive hiring in strategic units.

Looking forward, IBM’s next earnings call will be closely scrutinized for commentary on headcount plans, margin targets, and pipeline traction in Watsonx and Red Hat services. Any indication that the layoffs have accelerated revenue per employee or operational leverage could serve as a bullish trigger for investors.

In the longer term, IBM’s approach may offer a template for legacy tech firms grappling with digital transformation, workforce modernization, and AI adoption—blending internal use of automation with client-facing innovation.