IBM RELEASES FIRST-QUARTER RESULTS

Results exceed expectations driven by strong Software revenue growth, significant gross margin expansion and solid free cash flow

ARMONK, N.Y., April 23, 2025 -- IBM (NYSE: IBM) today announced first-quarter 2025 earnings results.

"We exceeded expectations for revenue, profitability and free cash flow in the quarter, led by strength across our Software portfolio. There continues to be strong demand for generative AI and our book of business stands at more than $6 billion inception-to-date, up more than $1 billion in the quarter," said Arvind Krishna, IBM chairman, president and chief executive officer. "We remain bullish on the long-term growth opportunities for technology and the global economy. While the macroeconomic environment is fluid, based on what we know today, we are maintaining our full-year expectations for revenue growth and free cash flow." 

First-Quarter Highlights

• Revenue
  - Revenue of $14.5 billion, up 1 percent, up 2 percent at constant currency
  - Software revenue up 7 percent, up 9 percent at constant currency
  - Consulting revenue down 2 percent, flat at constant currency
  - Infrastructure revenue down 6 percent, down 4 percent at constant currency
• Profit
  - Gross Profit Margin: GAAP: 55.2 percent, up 170 basis points; Operating (Non-GAAP): 56.6 percent, up 190 basis points
  - Pre-Tax Income Margin: GAAP: 8.0 percent, up 50 basis points; Operating (Non-GAAP): 12.0 percent, up 50 basis points
• Cash Flow
  - Net cash from operating activities of $4.4 billion; free cash flow of $2.0 billion

"Revenue growth, once again led by Software, combined with our productivity initiatives, drove significant gross margin expansion and operating leverage in the quarter," said James Kavanaugh, IBM senior vice president and chief financial officer. "With our focus on the fundamentals of our business, we continue to maintain a strong liquidity position and yield solid free cash flow. This enables us to both invest in our business and return value to shareholders through dividends."

Segment Results for First Quarter

• Software — revenues of $6.3 billion, up 7 percent, up 9 percent at constant currency:
  - Hybrid Cloud (Red Hat) up 12 percent, up 13 percent at constant currency
  - Automation up 14 percent, up 15 percent at constant currency
  - Data up 5 percent, up 7 percent at constant currency
  - Transaction Processing flat, up 2 percent at constant currency
  
  
• Consulting — revenues of $5.1 billion, down 2 percent, flat at constant currency:
  - Strategy and Technology down 3 percent, down 1 percent at constant currency
  - Intelligent Operations down 2 percent, flat at constant currency
  
  
• Infrastructure — revenues of $2.9 billion, down 6 percent, down 4 percent at constant currency:
  - Hybrid Infrastructure down 9 percent, down 7 percent at constant currency
        -- IBM Z down 15 percent, down 14 percent at constant currency
        -- Distributed Infrastructure down 5 percent, down 4 percent at constant currency
  - Infrastructure Support down 3 percent, flat at constant currency
  
  
• Financing — revenues of $0.2 billion, down 1 percent, up 2 percent at constant currency

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating activities of $4.4 billion, up $0.2 billion year to year. IBM's free cash flow was $2.0 billion, up $0.1 billion year to year. The company returned $1.5 billion to shareholders in dividends in the first quarter and invested $7.1 billion in acquisitions, including the acquisition of HashiCorp.

IBM ended the first quarter with $17.6 billion of cash, restricted cash and marketable securities, up $2.8 billion from year-end 2024. Debt, including IBM Financing debt of $10.0 billion, totaled $63.3 billion, up $8.3 billion year to date.

Expectations

• Revenue: The company continues to expect full-year constant currency revenue growth of at least 5 percent. At current foreign exchange rates, currency is expected to be about a one to one-and-a-half-point tailwind to growth for the year.
  - The company expects second-quarter revenue to be in the range of $16.40 billion to $16.75 billion.
• Free cash flow: The company continues to expect about $13.5 billion in free cash flow for the full year.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI and generative AI, including the company's increased offerings and use of AI-based technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity, privacy, and AI considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.

Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

For generative AI, book of business includes Software transactional revenue, SaaS Annual Contract Value and Consulting signings. The generative AI book of business is further defined within Exhibit 99.2 in the Form 8-K that includes this press release.

In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

IBM results —

• adjusting for currency (i.e., at constant currency);
• presenting operating (non-GAAP) earnings per share amounts and related income statement items;
• free cash flow;
• net cash from operating activities excluding IBM Financing receivables;
• adjusted EBITDA.

The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-1q25. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

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