IBM Q1 beats expectations

IBM kicked off 2025 on a high note, reporting first-quarter results that surpassed Wall Street expectations, led by robust growth in its Software business and sustained demand for generative AI solutions.

The tech giant posted $14.5 billion in revenue for the first quarter, up 1% year-over-year (2% in constant currency). Notably, Software revenues surged 7% (9% in constant currency), fueled by double-digit gains in hybrid cloud solutions and automation tools. IBM’s generative AI book of business now exceeds $6 billion since inception — growing by more than $1 billion in just the last quarter.

“We exceeded expectations for revenue, profitability and free cash flow this quarter, with Software leading the way,” said Arvind Krishna, IBM’s chairman and CEO. “Demand for generative AI remains strong, and we’re optimistic about long-term growth opportunities in both technology and the global economy.”

The company’s gross profit margin improved to 55.2% under GAAP (56.6% non-GAAP), with operating income margins also expanding. Free cash flow for the quarter totaled $2.0 billion, up from $1.9 billion a year earlier.

Segment Breakdown

• Software: $6.3 billion in revenue, +7%; hybrid cloud (Red Hat) +12%, automation +14%.
• Consulting: $5.1 billion, down 2%.
• Infrastructure: $2.9 billion, down 6%.
• Financing: $0.2 billion, down 1%.

While Consulting and Infrastructure revenues declined slightly, IBM reaffirmed its full-year outlook, expecting at least 5% constant currency revenue growth and approximately $13.5 billion in free cash flow for 2025.

Strategic Moves and AI Focus

IBM continues to double down on AI and hybrid cloud capabilities. The recent $7.1 billion acquisition of HashiCorp is expected to further strengthen IBM’s infrastructure automation and cloud security offerings — a move analysts say is well-aligned with the company’s strategic AI ambitions.

James Kavanaugh, IBM’s CFO, emphasized operational discipline and liquidity strength: “Our focus on business fundamentals enabled margin expansion and solid free cash flow. We’re investing in high-growth areas while delivering value back to shareholders.”

Looking Ahead

For the second quarter, IBM projects revenue between $16.4 billion and $16.75 billion. With steady momentum in software and AI-driven solutions, the company appears poised to navigate a fluid macroeconomic climate while capitalizing on enterprise AI adoption trends.