IBM RELEASES SECOND-QUARTER RESULTS

Results led by Software and Infrastructure revenue growth; Strong margin expansion; Raises outlook for profit and free cash flow

Jul 23, 2025

ARMONK, N.Y., July 23, 2025 /PRNewswire/ — IBM (NYSE: IBM) today announced second-quarter 2025 earnings results.

“We once again exceeded expectations for revenue, profit and free cash flow in the quarter. IBM remains highly differentiated in the market because of our deep innovation and domain expertise, both crucial in helping clients deploy and scale AI. Our generative AI book of business continues to accelerate and now stands at more than $7.5 billion,” said Arvind Krishna, IBM chairman, president and chief executive officer. “With our strong first-half performance, we are raising our full-year outlook for free cash flow, which we expect to exceed $13.5 billion.” 

Second-Quarter Highlights

• Revenue
  
  – Revenue of $17.0 billion, up 8 percent, up 5 percent at constant currency
  
  – Software revenue up 10 percent, up 8 percent at constant currency
  
  – Consulting revenue up 3 percent, flat at constant currency
  
  – Infrastructure revenue up 14 percent, up 11 percent at constant currency
• Profit
  
  – Gross Profit Margin: GAAP: 58.8 percent, up 200 basis points; Operating (Non-GAAP): 60.1 percent, up 230 basis points
  
  – Pre-Tax Income Margin: GAAP: 15.3 percent, up 120 basis points; Operating (Non-GAAP): 18.8 percent, up 110 basis points
• Cash Flow
  
  – Year to date, net cash from operating activities of $6.1 billion; free cash flow of $4.8 billion

“The innovation we are bringing to market across the portfolio continues to resonate with clients as they scale their AI adoption and investments. As a result, revenue growth, portfolio mix and ongoing productivity initiatives drove significant margin expansion and double-digit profit growth,” said James Kavanaugh, IBM senior vice president and chief financial officer. “This combination delivered solid free cash flow, fueling our ability to invest in the business and return value to shareholders through dividends.”

Segment Results for Second Quarter

• Software — revenues of $7.4 billion, up 10 percent, up 8 percent at constant currency:
  
  – Hybrid Cloud (Red Hat) up 16 percent, up 14 percent at constant currency
  
  – Automation up 16 percent, up 14 percent at constant currency
  
  – Data up 9 percent, up 7 percent at constant currency
  
  – Transaction Processing up 1 percent, down 2 percent at constant currency
  
   
• Consulting — revenues of $5.3 billion, up 3 percent, flat at constant currency:
  
  – Strategy and Technology up 1 percent, down 2 percent at constant currency
  
  – Intelligent Operations up 5 percent, up 2 percent at constant currency
  
   
• Infrastructure — revenues of $4.1 billion, up 14 percent, up 11 percent at constant currency:
  
  – Hybrid Infrastructure up 21 percent, up 19 percent at constant currency
  
        — IBM Z up 70 percent, up 67 percent at constant currency
  
        — Distributed Infrastructure down 15 percent, down 17 percent at constant currency
  
  – Infrastructure Support down 1 percent, down 3 percent at constant currency
  
   
• Financing — revenues of $0.2 billion, down 2 percent, down 3 percent at constant currency

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $1.7 billion, down $0.4 billion year to year. IBM’s free cash flow was $2.8 billion, up $0.2 billion year to year. The company returned $1.6 billion to shareholders in dividends in the second quarter.

For the first six months of the year, the company generated net cash from operating activities of $6.1 billion, down $0.2 billion year to year. IBM’s free cash flow was $4.8 billion, up $0.3 billion year to year.

IBM ended the second quarter with $15.5 billion of cash, restricted cash and marketable securities, up $0.7 billion from year-end 2024. Debt, including IBM Financing debt of $11.7 billion, totaled $64.2 billion, up $9.2 billion year to date.

Full-Year 2025 Expectations

• Revenue: The company continues to expect constant currency revenue growth of at least 5 percent. At current foreign exchange rates, currency is expected to be about a one-and-a-half-point tailwind to growth for the year.
• Free cash flow: The company now expects more than $13.5 billion in free cash flow for the full year.

Dividend Declaration

On July 23, 2025, the IBM board of directors approved a regular quarterly cash dividend of $1.68 per common share, to stockholders of record on August 8, 2025. With payment of the September 10, 2025 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company’s ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI and generative AI, including the company’s increased offerings and use of AI-based technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity, privacy, and AI considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.

Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

For generative AI, book of business includes Software transactional revenue plus new SaaS Annual Contract Value and Consulting signings related to specific offerings. The generative AI book of business is further defined within Exhibit 99.2 in the Form 8-K that includes this press release.

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

IBM results —

• adjusting for currency (i.e., at constant currency);
• presenting operating (non-GAAP) earnings per share amounts and related income statement items;
• free cash flow;
• net cash from operating activities excluding IBM Financing receivables;
• adjusted EBITDA.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q25. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

Contact:       IBM

                    Sarah Meron, 347-891-1770

                    sarah.meron@ibm.com 

    

                    Tim Davidson, 914-844-7847

                    tfdavids@us.ibm.com