Q4 2025 International Business Machines Corp Earnings Call Transcript
Key Points
- International Business Machines Corp (IBM) achieved 6% revenue growth in 2025, marking its highest level of revenue growth in many years.
- The company generated $14.7 billion in free cash flow, the highest level of cash generation in over a decade.
- Software now represents approximately 45% of IBM's business, up from about 25% in 2018, with a 9% growth rate, the highest annual growth rate in history.
- IBM's infrastructure segment delivered a robust quarter with a 17% growth, driven by the strength of the z17 platform.
- IBM's cumulative Gen AI book of business stands at over $12.5 billion, with significant contributions from both Software and Consulting.
- Red Hat's growth decelerated to 8%, partially due to the wrap on last year's elevated consumption-based services and delays in US federal business deal activity.
- Consulting revenue grew only 1% in the fourth quarter, reflecting a slower pace compared to other segments.
- IBM anticipates absorbing about $600 million of dilution from the Confluent acquisition in 2026, driven largely by stock-based compensation and interest expense.
- The infrastructure segment is expected to see a low-single-digit decline in revenue in 2026 due to product cycle dynamics.
- IBM faces challenges with higher cash taxes, increased investments in CapEx, and higher net interest expenses impacting free cash flow.
Welcome, and thank you for standing by. (Operator Instructions) Today's conference is being recorded. If you have any objections, you may disconnect at this time.
Now I will turn the meeting over to Olympia McNerney, IBM's Global Head of Investor Relations. Olympia, you may begin.
Thank you. I'd like to welcome you to IBM's fourth-quarter 2025 earnings presentation. I'm Olympia McNerney, and I'm here today with Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer; and Jim Kavanaugh, IBM's Senior Vice President and Chief Financial Officer. We'll post today's prepared remarks with a replay of today's webcast on the IBM investor website within a couple of hours. The earnings presentation is already available.
To provide additional information to our investors, our presentation includes certain non-GAAP measures. For example, all of our references to revenue and signings growth are at constant currency. We provided reconciliation charts for
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