TLDR
- IBM Q3 revenue jumps 9%, fueled by booming AI and hybrid cloud demand.
- AI book of business hits $9.5B, strengthening IBM’s growth trajectory.
- Software and infrastructure segments drive double-digit performance.
- Margins expand as AI-driven efficiency boosts IBM’s profitability.
- IBM raises 2025 guidance, forecasting $14B in free cash flow growth.
IBM closed 1.94% higher at $287.51 after reporting stronger-than-expected Q3 2025 results across its core business segments.
International Business Machines Corporation, IBM
The company achieved a 9% year-over-year revenue growth, reaching $16.3 billion, while strengthening its AI-related offerings. This performance prompted IBM to raise its full-year guidance for revenue and free cash flow.
AI Momentum Strengthens with $9.5 Billion Book of Business
IBM continued to expand its AI portfolio as the AI book of business surpassed $9.5 billion in value. Clients across sectors increasingly adopted IBM’s AI solutions to enhance productivity and streamline operations. This momentum helped the company outpace its previous growth expectations.
AI-driven demand also supported margin expansion, with gross profit margin improving to 57.3% on a GAAP basis. The operating margin reached 58.7%, indicating improved cost management and stronger enterprise demand. IBM emphasized its focus on real-world AI applications to drive tangible business outcomes.
AI growth is now a central driver of performance across IBM’s software and consulting units. Software revenue increased 10% to $7.2 billion, driven by growth in automation and data platforms. Consulting revenue increased by 3%, driven by an intelligent operations and technology strategy.
Infrastructure and Software Fuel Segment Performance
Infrastructure revenue reached $3.6 billion, a 17% increase, driven by robust demand for IBM Z systems. IBM Z alone surged 61%, reinforcing the company’s position in hybrid infrastructure and mainframe solutions. Distributed infrastructure also saw a 10% rise, signaling healthy enterprise upgrade cycles.
Software remained a strong contributor, led by automation, which grew 24%, and hybrid cloud solutions, which increased by 14%. Data platforms advanced 8%, while only transaction processing saw a slight 1% decline. The segment’s performance affirmed IBM’s software-led growth and recurring revenue strategy.
Consulting revenue improved modestly, with strategy and intelligent operations contributing to stable growth. Despite currency headwinds, performance at constant currency remained solid across segments. IBM also reported growth in its financing business, which increased by 10% during the quarter.
Cash Flow Gains and Outlook Upgrade Underscore Financial Health
IBM generated $3.1 billion in operating cash flow for the quarter and $7.2 billion year-to-date. Free cash flow for the nine-month period reached $7.2 billion, up $0.6 billion compared to last year. The company returned $1.6 billion to shareholders via dividends.
IBM now expects more than 5% constant-currency revenue growth for full-year 2025. Free cash flow is forecasted to reach approximately $14 billion, reflecting improved operating leverage. Currency tailwinds are expected to contribute 1.5 points to revenue growth.
The board declared a quarterly dividend of $1.68 per share, payable December 10 to shareholders of record on November 10. IBM has paid consecutive quarterly dividends since 1916. This consistent return policy reinforces its commitment to capital discipline and long-term growth.
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