10-QPeriod: Q3 FY2025

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q3 Ended Sep 30, 2025

Filed October 23, 2025For Securities:IBM

Summary

IBM reported a strong third quarter and nine-month performance for 2025, demonstrating robust revenue growth across its key segments, particularly Software and Infrastructure. The company's strategic focus on hybrid cloud and AI continues to drive results, evidenced by double-digit revenue growth in Software and significant increases in Infrastructure driven by new product cycles. The company's operating (non-GAAP) earnings and margins show continued improvement, highlighting operational efficiencies and effective portfolio management. Financially, IBM exhibits solid cash flow generation, with substantial free cash flow supporting investments and shareholder returns. The company has strengthened its balance sheet through debt issuances, maintaining financial flexibility for future growth and acquisitions, such as the significant HashiCorp acquisition. While facing some currency headwinds, IBM's performance underscores its resilient business model and strategic execution in a dynamic macroeconomic environment.

Financial Highlights

49 data points
Beta

Revenue

$16.33B

57.3% Gross Margin

Net Income

$1.74B

10.7% Net Margin

EPS (Diluted)

$1.84

Total Assets

$146.31B

Cash & Equivalents

$11.57B

Free Cash Flow

$2.83B

Financial Statements
Beta
Revenue$16.33B
Cost of Revenue$6.97B
Gross Profit$9.36B
R&D Expenses$2.08B
SG&A Expenses$4.75B
Operating Income$4.99B
Interest Expense$492.00M
Net Income$1.74B
EPS (Basic)$1.87
EPS (Diluted)$1.84
Shares Outstanding (Basic)933.86M
Shares Outstanding (Diluted)948.93M

Key Highlights

  • 1Total revenue increased by 9.1% year-over-year to $16.3 billion for the third quarter of 2025.
  • 2Software segment revenue grew 10.5% year-over-year to $7.2 billion, driven by strong performance in Automation, Hybrid Cloud, and Data.
  • 3Infrastructure revenue saw a substantial increase of 17.0% year-over-year to $3.6 billion, bolstered by the new IBM z17 platform.
  • 4Operating (non-GAAP) earnings per share increased by 15.2% to $2.65 for the third quarter.
  • 5Cash provided by operating activities was $3.1 billion for the third quarter, and free cash flow was $2.4 billion.
  • 6The company completed six acquisitions in the first nine months of 2025, including the significant HashiCorp acquisition, to bolster its hybrid cloud and AI strategy.
  • 7IBM reported strong returns on equity in its Financing segment, with a 32.0% return for the third quarter.

Frequently Asked Questions

IBM's total revenue increased by 9.1% year-over-year to $16.3 billion for the third quarter of 2025. Adjusted for currency, revenue grew by 7.3%.

The Software segment revenue grew 10.5% year-over-year to $7.2 billion. This growth was primarily driven by strong performance in Automation, Hybrid Cloud (Red Hat), and Data, with particular strength noted in OpenShift, Ansible, and AI portfolio offerings. Transaction Processing revenue saw a slight decline, influenced by clients prioritizing hardware spending on the new IBM z17.

IBM's strategic focus on AI and hybrid cloud is evident across its segments. Software growth is fueled by offerings like Hybrid Cloud and AI portfolio strength. Infrastructure revenue benefited from the launch of the IBM z17, designed for AI and hybrid cloud workloads. Consulting is also supporting clients in their AI transformations. The company's operating (non-GAAP) earnings and margins continue to improve, reflecting the success of these strategic initiatives.

IBM demonstrated strong financial health, generating $3.1 billion in cash from operating activities and $2.4 billion in free cash flow in the third quarter. Total debt increased due to strategic debt issuances to enhance liquidity and fund acquisitions, but the company maintains financial flexibility with significant cash and marketable securities.