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IBM reported its third-quarter 2025 earnings, demonstrating accelerating performance across all segments and exceeding market expectations for revenue, profit, and free cash flow. Driven by demand for its AI and hybrid cloud offerings, the company subsequently raised its full-year guidance for both revenue growth and free cash flow.
IBM Chairman and CEO, Arvind Krishna, highlighted the quarter's results, noting that the company's AI business book of business now surpasses USD 9.5 billion.
Key financial highlights (Third-Quarter 2025)
IBM reported total revenue of USD 16.3 billion, marking a 9% increase year-over-year (7% at constant currency). Profitability also saw significant improvement.
Metric | Q3 2025 Result | Year-over-Year Change |
Total Revenue | USD 16.3 billion | Up 9% (Up 7% at constant currency) |
GAAP Gross Profit Margin | 57.3% | Up 1.1 points |
Operating (Non-GAAP) Gross Profit Margin | 58.7% | Up 1.2 points |
Operating (Non-GAAP) Pre-Tax Income Margin | 18.6% | Up 2.0 points |
Operating (Non-GAAP) Diluted EPS | USD 2.65 | Up 15% |
The company generated USD 2.4 billion in free cash flow for the quarter, an increase of USD 0.3 billion from the prior year.
Segment performance shows momentum
All core operating segments posted revenue growth, with Infrastructure leading the way due to strong performance in the IBM Z mainframe business.
Segment | Q3 2025 Revenue | Y/Y Revenue Growth (Constant Currency) | Key Drivers |
Infrastructure | USD 3.6 billion | Up 15% | Hybrid Infrastructure, with IBM Z revenue up 59%. |
Software | USD 7.2 billion | Up 9% | Driven by Hybrid Cloud (Red Hat) up 12% and Automation up 22%. |
Consulting | USD 5.3 billion | Up 2% | Solid growth in Intelligent Operations (up 4%). |
Financing | USD 0.2 billion | Up 8% |
Raised full-year outlook
Citing the business strength and disciplined execution, IBM CFO James Kavanaugh confirmed the updated outlook.
For the full year 2025, IBM now expects:
Constant Currency Revenue Growth: More than 5% (an increase from the prior forecast).
Free Cash Flow: About USD 14 billion (an increase from the prior forecast).
Balance sheet and shareholder return
IBM ended the quarter with USD 14.9 billion in cash and marketable securities. Year-to-date free cash flow stood at USD 7.2 billion, up $0.6 billion year-over-year.
The company returned USD 1.6 billion to shareholders via dividends in the third quarter. The board of directors approved a regular quarterly cash dividend of USD 1.68 per common share, marking the company's continuous payment of consecutive quarterly dividends since 1916.
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