IBM RELEASES THIRD-QUARTER RESULTS

Acceleration in revenue growth and profit across all segments; Raises outlook for full-year revenue growth and free cash flow

ARMONK, N.Y., Oct. 22, 2025 /PRNewswire/ -- IBM (NYSE: IBM) today announced third-quarter 2025 earnings results.

"This quarter we accelerated performance across all of our segments, and again exceeded expectations for revenue, profit and free cash flow. Clients globally continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI. Our AI book of business now stands at more than $9.5 billion," said Arvind Krishna, IBM chairman, president and chief executive officer. "Given the strength of our business, we are raising our full-year outlook for revenue growth and free cash flow."

Third -Quarter Highlights

• Revenue
  - Revenue of $16.3 billion, up 9 percent, up 7 percent at constant currency
  - Software revenue up 10 percent, up 9 percent at constant currency
  - Consulting revenue up 3 percent, up 2 percent at constant currency
  - Infrastructure revenue up 17 percent, up 15 percent at constant currency
• Profit
  - Gross Profit Margin: GAAP: 57.3 percent, up 1.1 points; Operating (Non-GAAP): 58.7 percent, up 1.2 points
  - Pre-Tax Income Margin: GAAP: 14.9 percent, up 20.2 points; Operating (Non-GAAP): 18.6 percent, up 2.0 points
• Cash Flow
  - Year to date, net cash from operating activities of $9.2 billion; free cash flow of $7.2 billion

"New innovation, the strength and diversity of our portfolio, and our disciplined execution led to acceleration in revenue growth and profit in the quarter," said James Kavanaugh, IBM senior vice president and chief financial officer. "Consistent focus on the fundamentals of our business delivered double-digit growth in adjusted EBITDA, and drove another quarter of strong free cash flow, the fuel for our investments and ability to return value to shareholders."

Segment Results for Third Quarter

• Software — revenues of $7.2 billion, up 10 percent, up 9 percent at constant currency:
  - Hybrid Cloud (Red Hat) up 14 percent, up 12 percent at constant currency
  - Automation up 24 percent, up 22 percent at constant currency
  - Data up 8 percent, up 7 percent at constant currency
  - Transaction Processing down 1 percent, down 3 percent at constant currency
  
  
• Consulting — revenues of $5.3 billion, up 3 percent, up 2 percent at constant currency:
  - Strategy and Technology up 2 percent, flat at constant currency
  - Intelligent Operations up 5 percent, up 4 percent at constant currency
  
  
• Infrastructure — revenues of $3.6 billion, up 17 percent, up 15 percent at constant currency:
  - Hybrid Infrastructure up 28 percent, up 26 percent at constant currency
        -- IBM Z up 61 percent, up 59 percent at constant currency
        -- Distributed Infrastructure up 10 percent, up 8 percent at constant currency
  - Infrastructure Support up 1 percent, flat at constant currency
  
  
• Financing — revenues of $0.2 billion, up 10 percent, up 8 percent at constant currency

Cash Flow and Balance Sheet

In the third quarter, the company generated net cash from operating activities of $3.1 billion, up $0.2 billion year to year. IBM's free cash flow was $2.4 billion, up $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the third quarter.

For the first nine months of the year, the company generated net cash from operating activities of $9.2 billion, flat year to year. IBM's free cash flow was $7.2 billion, up $0.6 billion year to year.

IBM ended the third quarter with $14.9 billion of cash, restricted cash and marketable securities, up $0.1 billion from year-end 2024. Debt, including IBM Financing debt of $11.3 billion, totaled $63.1 billion, up $8.1 billion year to date.

Full-Year 2025 Expectations

• Revenue: The company now expects constant currency revenue growth of more than 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 about $14 billion in free cash flow for the full year.

Dividend Declaration

On October 22, 2025, the IBM board of directors approved a regular quarterly cash dividend of $1.68 per common share, to stockholders of record on November 10, 2025. With payment of the December 10, 2025 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-3q25. 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