IBM 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.
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.
