IBM (IBM) Q4 2024 earnings summary

Executive summary

• Achieved 3% revenue growth and $12.7B free cash flow in 2024, with all segments delivering growth over the last three years.

• Software led with 9% full-year growth and double-digit Q4 growth, Red Hat up 17%, and generative AI book of business surpassed $5B, up $2B quarter over quarter.

• Met or exceeded mid-term targets for revenue, profitability, and free cash flow; software now ~45% of business.

• Closed the year with the highest free cash flow margin in company history and exceeded targets for revenue, profitability, and free cash flow.

• Operating profitability and cash flow strength enabled continued investment and $6.1B in annual dividends.

Financial highlights

• 2024 revenue: $62.8B, up 3%; operating pre-tax income: $11.2B; operating EPS: $10.33.

• Free cash flow grew 14% year-over-year to $12.7B, with operating pre-tax margin up 120 bps and gross margin up 130 bps.

• Q4 revenue: $17.6B, up 2% year-over-year; software up 11%, consulting down 1%, infrastructure down 6%.

• Adjusted EBITDA for FY24 was $16.4B, up 6% year-over-year.

• FY24 net income was $9.7B, up 7% operating, diluted EPS grew 7% to $10.33.

Outlook and guidance

• 2025 revenue growth expected at least 5% at constant currency, with $13.5B free cash flow.

• Software revenue growth approaching double digits, Red Hat mid-teens, consulting low single digits, infrastructure to contribute about one point to overall growth.

• Operating pre-tax margin to expand by over half a point; double-digit adjusted EBITDA growth expected.

• Currency expected to be a two-point headwind to revenue growth.

• Q1 2025 revenue growth rate expected similar to Q4 2024; workforce rebalancing and margin expansion planned.