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IBM’s Cloud Growth Slows Despite Strong AI Mainframe Demand and Solid Q3 Results

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IBM reported third-quarter revenue and profit that beat market expectations, but investor optimism dimmed as growth in its key cloud software division slowed. The company’s shares fell 5% in after-hours trading, despite strong results driven by soaring demand for its new AI-powered mainframe systems.

Revenue in the hybrid cloud unit, which includes Red Hat, rose 14% compared to 16% in the previous quarter — a slowdown that raised investor concern about IBM’s ability to fully capitalize on the global cloud boom. Total quarterly revenue reached $16.33 billion, surpassing analyst estimates of $16.09 billion, according to LSEG data.

CEO Arvind Krishna said IBM expects Red Hat’s growth to return to mid-teen levels by 2026. Analysts noted that the deceleration in software sales may disappoint investors, given the segment’s high margins. However, IBM’s infrastructure division, housing its mainframe business, was a standout performer with revenue up 17% to $3.56 billion.

The new mainframe, optimized for AI workloads, is being widely adopted in the financial sector due to its data security and encryption strengths. IBM’s total AI-related business has grown to $9.5 billion, up $2 billion from the previous quarter. The company raised its full-year outlook, now expecting revenue growth above 5% at constant currency.

Meta to Cut 600 Jobs in Superintelligence Labs as AI Unit Restructures

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Meta announced plans to cut approximately 600 positions within its Superintelligence Labs division, part of a restructuring aimed at making the company’s artificial intelligence operations more agile and efficient. The layoffs will impact teams across Facebook Artificial Intelligence Research (FAIR), product-related AI, and AI infrastructure, according to the company.

Meta said affected employees are encouraged to apply for other internal roles. However, the newly created TBD Lab — a smaller group of researchers and engineers developing next-generation foundation models — will remain untouched. Chief AI Officer Alexandr Wang emphasized that the reduction in staff would streamline decision-making and increase each member’s scope and influence.

The reorganization follows a period of leadership turnover and mixed reception to Meta’s Llama 4 open-source model. The company recently consolidated all AI initiatives under the Superintelligence Labs umbrella to accelerate progress in foundational and applied AI research.

Separately, Meta secured a $27 billion financing agreement with Blue Owl Capital to fund its largest data center project to date. Analysts say the deal could help Meta advance its massive AI infrastructure plans while mitigating financial risks.

Conservative Activist Robby Starbuck Sues Google Over Defamatory AI ‘Hallucinations’

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Conservative activist Robby Starbuck has filed a lawsuit against Google, accusing the company’s artificial intelligence systems of generating and spreading false and defamatory claims about him, including labeling him a “child rapist,” “serial sexual abuser,” and “shooter.”

The complaint, filed in Delaware state court, alleges that Google’s Bard and Gemma chatbots produced fabricated statements that reached millions of users, citing non-existent sources and failing to correct errors after being notified. Starbuck is seeking at least $15 million in damages.

A Google spokesperson, Jose Castaneda, acknowledged that the allegations stem from AI “hallucinations” — a known issue with large language models (LLMs) where systems generate false or misleading information. “We disclose this issue and work hard to minimize it,” Castaneda said. “But as everyone knows, if you’re creative enough, you can prompt a chatbot to say something misleading.”

Starbuck, a vocal critic of diversity, equity, and inclusion (DEI) policies, said the false claims have caused reputational damage and personal safety risks. “No one — regardless of political beliefs — should ever experience this,” he said. “We must demand transparent, unbiased AI that cannot be weaponized to harm people.”

The lawsuit details how, in December 2023, Bard falsely linked Starbuck to white nationalist Richard Spencer using fabricated citations. Later, Google’s Gemma chatbot allegedly repeated similar falsehoods, accusing Starbuck of spousal abuse, participation in the January 6 riots, and even appearing in Jeffrey Epstein’s files.

Starbuck said these false claims have led to harassment and threats, citing the recent assassination of conservative activist Charlie Kirk as evidence of escalating risks for public figures.

This is not Starbuck’s first legal battle with Big Tech. He previously sued Meta Platforms over similar AI-generated falsehoods earlier this year; the two parties settled in August, and Starbuck has since advised Meta on AI ethics and accuracy.

The case highlights growing concerns over AI defamation risks and the legal responsibilities of tech companies deploying generative models capable of producing false, reputationally damaging statements.