IBM announced fourth-quarter 2025 earnings results.
"In the fourth quarter, we delivered strong revenue growth, with double-digit Software performance. Additionally, Infrastructure continued its double-digit revenue growth with the robust adoption of the next generation of our mainframe platform. Our generative AI book of business now stands at more than $12.5 billion. This capped a strong 2025 for IBM where we exceeded expectations for revenue, profit and free cash flow," said Arvind Krishna, IBM chairman, president and chief executive officer. "We enter 2026 with momentum and in a position of strength, giving us confidence in our full-year expectations of more than 5 percent constant currency revenue growth and an increase of about $1 billion in year-over-year free cash flow."
Fourth-Quarter Highlights
- Revenue
- Revenue of $19.7 billion, up 12 percent, up 9 percent at constant currency
- Software revenue up 14 percent, up 11 percent at constant currency
- Consulting revenue up 3 percent, up 1 percent at constant currency
- Infrastructure revenue up 21 percent, up 17 percent at constant currency - Profit
- Gross Profit Margin: GAAP: 60.6 percent, up 110 basis points; Operating (Non-GAAP): 61.8 percent, up 120 basis points
Full-Year Highlights
- Revenue
- Revenue of $67.5 billion, up 8 percent, up 6 percent at constant currency
- Software revenue up 11 percent, up 9 percent at constant currency
- Consulting revenue up 2 percent, flat at constant currency
- Infrastructure revenue up 12 percent, up 10 percent at constant currency - Profit
- Gross Profit Margin: GAAP: 58.2 percent, up 150 basis points; Operating (Non-GAAP): 59.5 percent, up 170 basis points - Cash Flow
- Net cash from operating activities of $13.2 billion; free cash flow of $14.7 billion
Full-Year 2026 Expectations
- Revenue: The company expects full-year constant currency revenue growth of more than 5 percent. At current foreign exchange rates, currency is expected to be about a half-point tailwind to growth for the year
- Free cash flow: The company expects full-year free cash flow to increase by about $1 billion year-over-year
|
FOURTH-QUARTER 2025 INCOME STATEMENT SUMMARY |
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|
Revenue |
Gross Profit |
Gross |
Pre-tax Income |
Pre-tax Income Margin |
Net Income |
Diluted Earnings Per Share |
||||||||||||||
|
GAAP from |
$ 19.7 B |
$ 11.9 B |
60.6 |
% |
$ 4.1 B |
21.0 |
% |
$ 5.6 B |
(2) |
$ 5.86 |
(2) |
|||||||||
|
Year/Year |
12 |
%(1) |
14 |
% |
1.1 |
Pts |
25 |
%(3) |
2.2 |
Pts(3) |
91 |
%(2,3) |
88 |
%(2,3) |
||||||
|
Operating (Non-GAAP) |
$ 12.2 B |
61.8 |
% |
$ 4.7 B |
24.1 |
% |
$ 4.3 B |
$ 4.52 |
||||||||||||
|
Year/Year |
14 |
% |
1.2 |
Pts |
11 |
% |
(0.2) |
Pts |
17 |
% |
15 |
% |
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|
(1) 9% at constant currency. |
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(2) 2025 GAAP results include a benefit from income taxes primarily driven by the resolution of certain tax audit matters. |
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|
(3) GAAP YTY results include the impact of a pension settlement charge in fourth-quarter 2024. |
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"2025 put IBM's durability, resilience and differentiation on display. Our portfolio mix, integrated value and rapid innovation drove higher revenue growth and double-digit profit and free cash flow growth," said James Kavanaugh, IBM senior vice president and chief financial officer. "We are excited about our prospects for 2026 as our disciplined execution and unwavering focus on productivity will continue to enable us to invest in the future while returning value to shareholders."
Segment Results for Fourth Quarter
- Software — revenues of $9.0 billion, up 14 percent, up 11 percent at constant currency:
- Hybrid Cloud (Red Hat) up 10 percent, up 8 percent at constant currency
- Automation up 18 percent, up 14 percent at constant currency
- Data up 22 percent, up 19 percent at constant currency
- Transaction Processing up 8 percent, up 4 percent at constant currency - Consulting — revenues of $5.3 billion, up 3 percent, up 1 percent at constant currency:
- Strategy & Technology up 2 percent, flat at constant currency
- Intelligent Operations up 5 percent, up 3 percent at constant currency - Infrastructure — revenues of $5.1 billion, up 21 percent, up 17 percent at constant currency:
- Hybrid Infrastructure up 29 percent, up 24 percent at constant currency
-- IBM Z up 67 percent, up 61 percent at constant currency
-- Distributed Infrastructure up 3 percent, flat at constant currency
- Infrastructure Support up 1 percent, down 2 percent at constant currency - Financing — revenues of $0.2 billion, up 5 percent, up 2 percent at constant currency
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from operating activities of $4.0 billion, down $0.3 billion year to year. Net cash from operating activities excluding IBM financing receivables was $8.1 billion, up $1.5 billion. IBM's free cash flow was $7.6 billion, up $1.4 billion year to year. The company returned $1.6 billion to shareholders in dividends in the fourth quarter.
For the year, the company generated net cash from operating activities of $13.2 billion, down $0.3 billion year to year. Net cash from operating activities excluding IBM financing receivables was $16.4 billion, up $2.5 billion. IBM's free cash flow was $14.7 billion, up $2.0 billion year to year.
IBM ended the fourth quarter with $14.5 billion of cash, restricted cash and marketable securities, down $0.3 billion from year-end 2024. Debt, including IBM Financing debt of $15.1 billion, totaled $61.3 billion, up $6.3 billion since year-end 2024.
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-4q25. Presentation charts will be available shortly before the Webcast.
