IBM (IBM) Q4 2025 earnings summary

Executive summary

• Achieved 6% revenue growth in 2025, with double-digit gains in Software and Infrastructure, and robust adoption of next-gen mainframe platforms; generative AI book of business surpassed $12.5B inception-to-date.

• Exceeded full-year 2025 expectations for revenue, profit, and free cash flow, with $14.7B free cash flow, a decade high.

• Software now 45% of business, up from 25% in 2018, with 9% annual growth and three sub-segments at double-digit growth.

• Strategic acquisitions (HashiCorp, Confluent) and partnerships (AMD, AWS, Microsoft, NVIDIA) enhanced portfolio and innovation.

• Consulting returned to growth, up 1% in Q4, with GenAI services driving demand.

Financial highlights

• Q4 2025 revenue reached $19.7B, up 12% year-over-year (9% at constant currency); full-year revenue was $67.5B, up 8% (6% at constant currency).

• Free cash flow reached $14.7B, up 16% year-over-year, with highest free cash flow margin in company history.

• Adjusted EBITDA for 2025: $19.2B, up 17% year-over-year; operating diluted EPS grew 12% to $11.59.

• Q4 net income was $5.6B, up 91% year-over-year; full-year net income was $10.6B, up 76%.

• Q4 operating (non-GAAP) gross profit margin: 61.8%; full-year: 59.5%.

Outlook and guidance

• 2026 guidance: 5%+ constant currency revenue growth, $1B increase in free cash flow, and 1 point operating pre-tax margin expansion.

• Software expected to grow 10% in 2026, with organic growth and M&A synergies as key drivers.

• Consulting revenue to accelerate to low- to mid-single digits, with GenAI backlog penetration over 25%.

• Infrastructure revenue expected to decline low single digits due to product cycle dynamics.

• Confluent acquisition expected to close mid-2026, with $600M dilution in 2026, but accretive to Adjusted EBITDA in year one post-close.