IBM Q2 2025 Earnings: Revenue Growth, AI Book Expands to $7.5 Billion, Shares Drop on Software Revenue Miss
IBM Q2 2025 Earnings Overview
International Business Machines Corporation (IBM) released its second-quarter 2025 results, showing an 8% year-over-year revenue growth to $16.98 billion and net income of $2.19 billion, or $2.31 per share – exceeding expectations on earnings per share but slightly missing software revenue estimates.
CEO Arvind Krishna highlighted that geopolitical tensions and somewhat constrained US federal spending affected client decisions temporarily, but the company does not foresee long-term headwinds.
Business Segment Highlights
- Software Revenue: Increased approximately 10% to $7.39 billion, slightly below analyst consensus of $7.43 billion.
- Hybrid Cloud Revenue: Grew 16%, including contributions from Red Hat.
- Consulting Revenue: Rose nearly 3% to $5.31 billion, surpassing the $5.16 billion consensus.
- Infrastructure Revenue: Increased 14% to $4.14 billion, above estimates.
Software gross margin was 83.9%, slightly under the expected 84%, as clients reprioritized spending towards hardware. IBM also announced new products, including the AI-optimized z17 mainframe and acquired AI consulting firm Hakkoda during the quarter.
AI Business Momentum
IBM’s generative artificial intelligence book of business expanded from $6 billion in April to $7.5 billion, reflecting strong client adoption of AI-powered solutions and investments.
Financial Guidance and Market Reaction
The company reaffirmed its target of over $13.5 billion in free cash flow for 2025, with expected revenue growth of at least 5% at constant currency for the full year. Despite beating earnings expectations, shares fell approximately 6% in extended trading due to the software revenue slight miss.
Summary
IBM demonstrated solid overall financial performance and an accelerating AI portfolio, driving optimism for sustained growth despite cautious client spending and geopolitical factors influencing near-term results.
