IBM

IBM reported a strong second quarter for 2025, with total revenue reaching $17.0 billion, an 8 percent increase year-over-year, or 5 percent at constant currency. This growth was broadly distributed across its key segments. Software revenues led the charge at $7.4 billion, up 10 percent (8 percent at constant currency), notably driven by Hybrid Cloud (Red Hat) and Automation, both up 16 percent. Infrastructure revenues also saw significant expansion, growing 14 percent (11 percent at constant currency) to $4.1 billion, with IBM Z experiencing a remarkable 70 percent increase. Consulting revenues grew 3 percent to $5.3 billion, remaining flat at constant currency, while Financing revenues declined 2 percent to $0.2 billion.

The company demonstrated substantial improvements in profitability and operational efficiency. GAAP gross profit margin expanded by 200 basis points to 58.8 percent, and operating (Non-GAAP) gross profit margin increased by 230 basis points to 60.1 percent. Pre-tax income margins also saw healthy gains, with GAAP pre-tax income margin up 120 basis points to 15.3 percent and operating pre-tax income margin rising 110 basis points to 18.8 percent. Net income from continuing operations grew 20 percent year-over-year to $2.2 billion, translating to GAAP diluted EPS of $2.31, an 18 percent increase. For the quarter, free cash flow was $2.8 billion, up $0.2 billion year-over-year.

Management highlighted the continued resonance of its innovation with clients, particularly in deploying and scaling AI solutions. The generative AI book of business has accelerated, now exceeding $7.5 billion, underscoring IBM's deep innovation and domain expertise in a critical growth area. CEO Arvind Krishna emphasized exceeding expectations for revenue, profit, and free cash flow, attributing success to IBM's differentiated market position. CFO James Kavanaugh noted that revenue growth, portfolio mix, and productivity initiatives were key drivers for margin expansion and double-digit profit growth, fueling investments and shareholder returns.

Looking ahead, IBM has raised its full-year 2025 outlook for free cash flow, now expecting to exceed $13.5 billion. The company maintains its expectation for constant currency revenue growth of at least 5 percent for the full year, with currency anticipated to provide about a one-and-a-half-point tailwind. This positive guidance reflects confidence in sustained demand for its hybrid cloud and AI offerings, supported by a consistent dividend declaration of $1.68 per common share, marking over a century of consecutive quarterly dividends.