The tech giant has been laying off employees recently as it shifts to high-margin business units like hybrid cloud software. In its most recent earnings call, IBM said it expects to save $2 billion annually by 2024.
Despite the AI hype, the technology is still a relatively new field for companies to invest in, and it could be years before companies have enough data to understand whether their investments have paid off. And the impact of generative AI, in particular, could be more of an evolution than a revolution. At the same time, a viral chatbot may get all the headlines; an analyst with global research firm Third Bridge Group said most of the revenue from AI is generated by platforms and services businesses use to solve specific problems. “Projects like OpenAI’s ChatGPT might grab the headlines, but the bulk of the AI product revenue is coming from enterprises investing hundreds of millions in IBM Watsonx and other platforms that deliver tangible business benefits,” Jordan Berger wrote in a note to clients.
IBM forecast full-year revenue growth above market estimates on Wednesday, banking on stable demand for IT software and consultancy services from businesses looking to adopt artificial intelligence (AI). The company’s core business of IT infrastructure services grew about 8%, helped by higher sales of its Red Hat products and Data & AI offerings. Meanwhile, hardware sales grew 4% and were led by the zSystems mainframe line, which jumped 71 percent compared to last year.
However, the hardware business represents only about a third of IBM’s total revenues, and the growth rate was below the StreetAccount consensus estimate. The software revenue grew about 3%, less than the StreetAccount forecast. Distributed infrastructure revenue, including servers using IBM’s Power chips, accelerated to 8% growth but remained below the StreetAccount forecast.
During the earnings call, CEO Arvind Krishna told reporters that the company would pause hiring for roles it believes can be replaced with automation. He estimated that 30% of back-office jobs, such as human resources, could be automated over the next five years. He added that rote tasks such as documenting employee moves between departments and writing employment verification letters could be among the first positions to be eliminated.
IBM will lay off some workers in 2024, but it will hire for more AI-centered roles and likely end the year with an unchanged headcount. The number of layoffs will be smaller than the tens of thousands of people cut by tech giants, including Meta, Amazon, and Alphabet in recent months. Nonetheless, it will add to the growing number of job losses in the tech industry overall. The company has already cut about 10,000 workers since the start of the year.