IBM RELEASES FOURTH-QUARTER RESULTS

Strong, broad-based performance, led by double-digit Software and Infrastructure growth;

Double-digit growth in full-year profit and free cash flow

ARMONK, N.Y., Jan. 28, 2026 /PRNewswire/ -- IBM (NYSE: IBM) today 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

"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.

Full-Year 2025 Results

Dividend Declaration

The IBM board of directors approved a regular quarterly cash dividend of $1.68 per common share, to stockholders of record on February 10, 2026. With payment of the March 10, 2026 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 inception to date 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-4q25. 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

                    Tim Davidson, 914-844-7847

                    tfdavids@us.ibm.com

                    Erin McElwee, 347-920-6825

                    erin.mcelwee@ibm.com