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IBM RELEASES THIRD-QUARTER RESULTS

Acceleration in revenue growth and profit across all segments; Raises outlook for full-year revenue growth and free cash flow
Oct 22, 2025

ARMONK, N.Y., Oct. 22, 2025 /PRNewswire/ -- IBM (NYSE: IBM) today announced third-quarter 2025 earnings results.

"This quarter we accelerated performance across all of our segments, and again exceeded expectations for revenue, profit and free cash flow. Clients globally continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI. Our AI book of business now stands at more than $9.5 billion," said Arvind Krishna, IBM chairman, president and chief executive officer. "Given the strength of our business, we are raising our full-year outlook for revenue growth and free cash flow."

Third-Quarter Highlights

  • Revenue
    - Revenue of $16.3 billion, up 9 percent, up 7 percent at constant currency
    - Software revenue up 10 percent, up 9 percent at constant currency
    - Consulting revenue up 3 percent, up 2 percent at constant currency
    - Infrastructure revenue up 17 percent, up 15 percent at constant currency
  • Profit
    - Gross Profit Margin: GAAP: 57.3 percent, up 1.1 points; Operating (Non-GAAP): 58.7 percent, up 1.2 points
    - Pre-Tax Income Margin: GAAP: 14.9 percent, up 20.2 points; Operating (Non-GAAP): 18.6 percent, up 2.0 points
  • Cash Flow
    - Year to date, net cash from operating activities of $9.2 billion; free cash flow of $7.2 billion

THIRD-QUARTER 2025 INCOME STATEMENT SUMMARY
 
 

Revenue

  

Gross

Profit

    

Gross

Profit

Margin

    

Pre-tax

Income

  

Pre-tax

Income

Margin

  

Net

Income

  

Diluted

Earnings

Per Share

GAAP from

Continuing

Operations

$  16.3 B

    

$    9.4 B

    

57.3

%

  

$    2.4 B

    

14.9

%

  

$    1.7 B

(2)

  

$    1.84

(2)

Year/Year

9

% (1)

  

11

%

  

1.1

Pts

  

NM

(3)

  

20.2

Pts (3)

  

NM

(2,3)

  

NM   

(2,3)

Operating

(Non-GAAP)

      

$    9.6 B

    

58.7

%

  

$    3.0 B

    

18.6

%

  

$    2.5 B

    

$    2.65

  

Year/Year

      

11

%

  

1.2

Pts

  

22

%

  

2.0

Pts

  

17

%

  

15

%

(1)  7% at constant currency.
(2) 2025 GAAP results include a one-time, non-cash income tax charge associated with the enactment of H.R. 1 in July of 2025.
(3) GAAP YTY results include the impact of a pension settlement charge in third-quarter 2024.
NM - not meaningful

"New innovation, the strength and diversity of our portfolio, and our disciplined execution led to acceleration in revenue growth and profit in the quarter," said James Kavanaugh, IBM senior vice president and chief financial officer. "Consistent focus on the fundamentals of our business delivered double-digit growth in adjusted EBITDA, and drove another quarter of strong free cash flow, the fuel for our investments and ability to return value to shareholders."

Segment Results for Third Quarter

  • Software — revenues of $7.2 billion, up 10 percent, up 9 percent at constant currency:
    - Hybrid Cloud (Red Hat) up 14 percent, up 12 percent at constant currency
    - Automation up 24 percent, up 22 percent at constant currency
    - Data up 8 percent, up 7 percent at constant currency
    - Transaction Processing down 1 percent, down 3 percent at constant currency
     
  • Consulting — revenues of $5.3 billion, up 3 percent, up 2 percent at constant currency:
    - Strategy and Technology up 2 percent, flat at constant currency
    - Intelligent Operations up 5 percent, up 4 percent at constant currency
     
  • Infrastructure — revenues of $3.6 billion, up 17 percent, up 15 percent at constant currency:
    - Hybrid Infrastructure up 28 percent, up 26 percent at constant currency
          -- IBM Z up 61 percent, up 59 percent at constant currency
          -- Distributed Infrastructure up 10 percent, up 8 percent at constant currency
    - Infrastructure Support up 1 percent, flat at constant currency
     
  • Financing — revenues of $0.2 billion, up 10 percent, up 8 percent at constant currency

Cash Flow and Balance Sheet

In the third quarter, the company generated net cash from operating activities of $3.1 billion, up $0.2 billion year to year. IBM's free cash flow was $2.4 billion, up $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the third quarter.

For the first nine months of the year, the company generated net cash from operating activities of $9.2 billion, flat year to year. IBM's free cash flow was $7.2 billion, up $0.6 billion year to year.

IBM ended the third quarter with $14.9 billion of cash, restricted cash and marketable securities, up $0.1 billion from year-end 2024. Debt, including IBM Financing debt of $11.3 billion, totaled $63.1 billion, up $8.1 billion year to date.

Full-Year 2025 Expectations

  • Revenue: The company now expects constant currency revenue growth of more than 5 percent. At current foreign exchange rates, currency is expected to be about a one-and-a-half-point tailwind to growth for the year.
  • Free cash flow: The company now expects about $14 billion in free cash flow for the full year.

Dividend Declaration

On October 22, 2025, the IBM board of directors approved a regular quarterly cash dividend of $1.68 per common share, to stockholders of record on November 10, 2025. With payment of the December 10, 2025 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.

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 inception to date Software transactional revenue, plus new SaaS Annual Contract Value and Consulting signings related to specific offerings. 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-3q25. 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).

Contact:       IBM
                    Tim Davidson, 914-844-7847
                    tfdavids@us.ibm.com

                    Erin McElwee, 347-920-6825
                    erin.mcelwee@ibm.com

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)
 
 

Three Months Ended
September 30,

    

Nine Months Ended
September 30,

  
 

2025

    

2024

    

2025

    

2024

  

REVENUE BY SEGMENT

                      

Software

$             7,209

    

$             6,524

    

$          20,932

    

$          19,162

  

Consulting

5,324

    

5,152

    

15,706

    

15,517

  

Infrastructure

3,559

    

3,042

    

10,586

    

9,764

  

Financing

200

    

181

    

557

    

543

  

Other

38

    

68

    

68

    

214

  

TOTAL REVENUE

16,331

    

14,968

    

47,849

    

45,199

  
                       

GROSS PROFIT

9,360

    

8,420

    

27,369

    

25,112

  
                       

GROSS PROFIT MARGIN

                      

Software

83.1

%

  

83.2

%

  

83.5

%

  

83.1

%

Consulting

29.3

%

  

28.4

%

  

28.0

%

  

26.7

%

Infrastructure

57.2

%

  

55.0

%

  

57.7

%

  

55.3

%

Financing

45.6

%

  

47.2

%

  

45.7

%

  

48.2

%
                       

TOTAL GROSS PROFIT MARGIN

57.3

%

  

56.3

%

  

57.2

%

  

55.6

%
                       

EXPENSE AND OTHER INCOME

                      

SG&A

4,748

    

4,911

    

14,661

    

14,823

  

R&D

2,082

    

1,876

    

6,129

    

5,512

  

Intellectual property and custom development income

(219)

    

(238)

    

(687)

    

(696)

  

Other (income) and expense (1)

(173)

    

2,244

    

(376)

    

1,694

  

Interest expense

492

    

429

    

1,457

    

1,288

  

TOTAL EXPENSE AND OTHER INCOME

6,931

    

9,222

    

21,184

    

22,621

  
                       

INCOME/(LOSS) FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES

2,430

    

(802)

    

6,185

    

2,491

  

Pre-tax margin

14.9

%

  

(5.4)

%

  

12.9

%

  

5.5

%

Provision for/(Benefit from) income taxes (1)

686

    

(485)

    

1,193

    

(597)

  

Effective tax rate

28.2

%

  

60.4

%

  

19.3

%

  

(24.0)

%
                       

INCOME/(LOSS) FROM CONTINUING OPERATIONS

$             1,744

    

$              (317)

    

$             4,992

    

$             3,088

  
                       

DISCONTINUED OPERATIONS

                      

Income/(loss) from discontinued operations, net of

taxes

0

    

(13)

    

1

    

21

  
                       

NET INCOME/(LOSS) (1)

$             1,744

    

$              (330)

    

$             4,993

    

$             3,109

  
                       

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK (1)

                      

Assuming Dilution

                      

Continuing Operations

$               1.84

    

$             (0.34)

    

$               5.27

    

$               3.30

  

Discontinued Operations

$               0.00

    

$             (0.01)

    

$               0.00

    

$               0.02

  

TOTAL

$               1.84

    

$             (0.36)

    

$               5.27

    

$               3.32

  
                       

Basic

                      

Continuing Operations

$               1.87

    

$             (0.34)

    

$               5.36

    

$               3.36

  

Discontinued Operations

$               0.00

    

$             (0.01)

    

$               0.00

    

$               0.02

  

TOTAL

$               1.87

    

$             (0.36)

    

$               5.36

    

$               3.38

  
                       

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES

OUTSTANDING (M's)

                      

Assuming Dilution

948.9

    

923.6

    

947.4

    

935.4

  

Basic

933.9

    

923.6

    

930.9

    

920.3

  

____________________

(1)  2024 includes the impact of a pension settlement charge of $2.7 billion ($2.0 billion net of tax).

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET 

(Unaudited)
 

(Dollars in Millions)

  

At September 30,
2025

  

At December 31,
2024

ASSETS:

        

Current Assets:

        

Cash and cash equivalents

  

$                  11,569

  

$                  13,947

Restricted cash

  

30

  

214

Marketable securities

  

3,286

  

644

Notes and accounts receivable - trade, net

  

5,532

  

6,804

Short-term financing receivables

        

  Held for investment, net

  

5,156

  

6,259

  Held for sale

  

745

  

900

Other accounts receivable, net

  

1,174

  

947

Inventories

  

1,397

  

1,289

Deferred costs

  

1,113

  

959

Prepaid expenses and other current assets

  

2,739

  

2,520

Total Current Assets

  

32,740

  

34,482
         

Property, plant and equipment, net

  

5,851

  

5,731

Operating right-of-use assets, net

  

3,223

  

3,197

Long-term financing receivables, net

  

6,258

  

5,353

Prepaid pension assets

  

8,044

  

7,492

Deferred costs

  

768

  

788

Deferred taxes

  

8,505

  

6,978

Goodwill

  

67,396

  

60,706

Intangibles, net

  

11,729

  

10,660

Investments and sundry assets

  

1,796

  

1,787

Total Assets

  

$                146,312

  

$                137,175
         

LIABILITIES:

        

Current Liabilities:

        

Taxes

  

$                    1,663

  

$                    2,033

Short-term debt

  

7,942

  

5,089

Accounts payable

  

3,867

  

4,032

Compensation and benefits

  

3,508

  

3,605

Deferred income

  

13,878

  

13,907

Operating lease liabilities

  

807

  

768

Other liabilities

  

3,477

  

3,709

Total Current Liabilities

  

35,142

  

33,142
         

Long-term debt

  

55,174

  

49,884

Retirement-related obligations

  

9,735

  

9,432

Deferred income

  

3,863

  

3,622

Operating lease liabilities

  

2,646

  

2,655

Other liabilities

  

11,762

  

11,048

Total Liabilities

  

118,322

  

109,783
         

EQUITY:

        

IBM Stockholders' Equity:

        

Common stock

  

62,819

  

61,380

Retained earnings

  

151,581

  

151,163

Treasury stock - at cost

  

(170,512)

  

(169,968)

Accumulated other comprehensive income/(loss)

  

(15,983)

  

(15,269)

Total IBM Stockholders' Equity

  

27,905

  

27,307
         

Noncontrolling interests

  

85

  

86

Total Equity

  

27,990

  

27,393
         

Total Liabilities and Equity

  

$                146,312

  

$                137,175

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)
 
   

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

(Dollars in Millions)

  

2025

  

2024

  

2025

  

2024

Net Income/(Loss) from Operations

  

$             1,744

  

$              (330)

  

$             4,993

  

$             3,109

Pension Settlement Charge

  

-

  

2,725

  

-

  

2,725

Depreciation/Amortization of Intangibles (1)

  

1,283

  

1,268

  

3,725

  

3,555

Stock-based Compensation

  

444

  

330

  

1,285

  

966

Operating assets and liabilities/Other, net (2)

  

(688)

  

(1,984)

  

(1,755)

  

(3,063)

IBM Financing A/R

  

298

  

873

  

905

  

1,824

Net Cash Provided by Operating Activities

  

$             3,081

  

$             2,881

  

$             9,153

  

$             9,115
                 

Capital Expenditures, net of payments & proceeds (3)

  

(410)

  

55

  

(1,067)

  

(705)

Divestitures, net of cash transferred

  

-

  

2

  

(1)

  

705

Acquisitions, net of cash acquired

  

(58)

  

(2,513)

  

(7,903)

  

(2,748)

Marketable Securities / Other Investments, net

  

30

  

869

  

(2,748)

  

(810)

Net Cash Provided by/(Used in) Investing Activities

  

$              (437)

  

$           (1,587)

  

$         (11,719)

  

$           (3,558)
                 

Debt, net of payments & proceeds

  

(1,108)

  

(1,259)

  

4,683

  

(777)

Dividends

  

(1,569)

  

(1,542)

  

(4,681)

  

(4,601)

Financing - Other

  

(334)

  

35

  

(425)

  

(26)

Net Cash Provided by/(Used in) Financing Activities

  

$           (3,012)

  

$           (2,766)

  

$              (423)

  

$           (5,403)
                 

Effect of Exchange Rate changes on Cash

  

(59)

  

207

  

429

  

(29)

Net Change in Cash, Cash Equivalents and Restricted Cash

  

$              (426)

  

$           (1,264)

  

$           (2,561)

  

$                125

____________________

(1)  Includes operating lease right-of-use assets amortization.

(2)  2025 includes a one-time, non-cash income tax charge of $0.3 billion associated with the enactment of H.R. 1 in July of 2025, and 2024

       includes a $0.7 billion tax benefit associated with the pension settlement charge in the third quarter.

(3)  2024 includes proceeds of $0.4 billion from the sale of certain QRadar SaaS assets in the third quarter.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION

(Unaudited)
 
   

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

(Dollars in Billions)

  

2025

2024

Yr/Yr

  

2025

2024

Yr/Yr

Net Income (Loss)  as reported (GAAP) (1)

  

$       1.7

$      (0.3)

$       2.1

  

$       5.0

$       3.1

$       1.9

Less: Income/(Loss) from discontinued operations, net of tax

  

0.0

0.0

0.0

  

0.0

0.0

0.0

Income/(Loss) from continuing operations

  

1.7

(0.3)

2.1

  

5.0

3.1

1.9

Provision for/(Benefit from) income taxes from continuing ops.

  

0.7

(0.5)

1.2

  

1.2

(0.6)

1.8

Pre-tax income/(loss) from continuing operations (GAAP)

  

2.4

(0.8)

3.2

  

6.2

2.5

3.7

Non-operating adjustments (before tax)

                

Acquisition-related charges (2)

  

0.6

0.5

0.1

  

1.7

1.5

0.3

Non-operating retirement-related costs/(income) (1)

  

0.0

2.8

(2.8)

  

0.1

3.0

(2.9)
                 

Operating (non-GAAP) pre-tax income from continuing ops.

  

3.0

2.5

0.5

  

8.0

6.9

1.0
                 

Net interest expense

  

0.3

0.3

0.1

  

0.9

0.7

0.3

Depreciation/Amortization of non-acquired intangible assets

  

0.7

0.7

0.0

  

2.1

2.1

0.0

Stock-based compensation

  

0.4

0.3

0.1

  

1.3

1.0

0.3

Workforce rebalancing charges

  

0.0

0.3

(0.3)

  

0.4

0.7

(0.3)

Corporate (gains) and charges (3)

  

0.0

(0.4)

0.4

  

0.0

(0.6)

0.6
                 

Adjusted EBITDA

  

$       4.6

$       3.8

$       0.8

  

$     12.7

$     10.8

$       1.8

____________________

(1)  2024 includes the impact of a pension settlement charge of $2.7 billion ($2.0 billion net of tax).

(2)  Primarily consists of amortization of acquired intangible assets.

(3)  Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures and asset sales (e.g., certain 

      QRadar SaaS assets in 2024).

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)
 
   

Three Months Ended September 30, 2025

  
                         

(Dollars in Millions)

  

Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$               7,209

    

$               5,324

    

$               3,559

    

$                  200

  

Segment Profit

  

$               2,374

    

$                  686

    

$                  644

    

$                  123

  

Segment Profit Margin

  

32.9

%

  

12.9

%

  

18.1

%

  

61.6

%

Change YTY Revenue

  

10.5

%

  

3.3

%

  

17.0

%

  

10.4

%

Change YTY Revenue - Constant Currency

  

8.8

%

  

1.5

%

  

15.1

%

  

8.5

%
 
   

Three Months Ended September 30, 2024

  
                         

(Dollars in Millions)

  

 Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$               6,524

    

$               5,152

    

$               3,042

    

$                  181

  

Segment Profit

  

$               1,969

    

$                  559

    

$                  422

    

$                    86

  

Segment Profit Margin

  

30.2

%

  

10.9

%

  

13.9

%

  

47.5

%
 
   

Nine Months Ended September 30, 2025

  
                         

(Dollars in Millions)

  

Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$             20,932

    

$             15,706

    

$             10,586

    

$                  557

  

Segment Profit

  

$               6,517

    

$               1,807

    

$               1,857

    

$                  371

  

Segment Profit Margin

  

31.1

%

  

11.5

%

  

17.5

%

  

66.5

%

Change YTY Revenue

  

9.2

%

  

1.2

%

  

8.4

%

  

2.7

%

Change YTY Revenue - Constant Currency

  

8.4

%

  

0.2

%

  

7.7

%

  

2.6

%
 
   

Nine Months Ended September 30, 2024

  
                         

(Dollars in Millions)

  

 Software

    

Consulting

    

Infrastructure

    

Financing

  

Revenue

  

$             19,162

    

$             15,517

    

$               9,764

    

$                  543

  

Segment Profit

  

$               5,582

    

$               1,447

    

$               1,387

    

$                  254

  

Segment Profit Margin

  

29.1

%

  

9.3

%

  

14.2

%

  

46.9

%

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)
 
 

Three Months Ended September 30, 2025

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts (3)

    

Operating

(Non-

GAAP)

  

Gross Profit

$    9,360

    

$                  231

    

$                        —

    

$               —

    

$          9,591

  

Gross Profit Margin

57.3

%

  

1.4

pts

  

—

pts

  

—

pts

  

58.7

%

SG&A

$    4,748

    

$                 (354)

    

$                        —

    

$               —

    

$          4,394

  

Other (Income) & Expense

(173)

    

(6)

    

(13)

    

—

    

(191)

  

Total Expense & Other (Income)

6,931

    

(359)

    

(13)

    

—

    

6,559

  

Pre-tax Income from Continuing Operations

2,430

    

590

    

13

    

—

    

3,033

  

Pre-tax Income Margin from Continuing

Operations

14.9

%

  

3.6

pts

  

0.1

pts

  

—

pts

  

18.6

%

Provision for/(Benefit from) Income Taxes (4)

$       686

    

$                  136

    

$                         3

    

$           (309)

    

$             516

  

Effective Tax Rate

28.2

%

  

(1.0)

pts

  

0.0

pts

  

(10.2)

pts

  

17.0

%

Income from Continuing Operations

$    1,744

    

$                  454

    

$                       10

    

$            309

    

$          2,517

  

Income Margin from Continuing Operations

10.7

%

  

2.8

pts

  

0.1

pts

  

1.9

pts

  

15.4

%

Diluted Earnings Per Share: Continuing

Operations

$      1.84

    

$                 0.48

    

$                    0.01

    

$           0.33

    

$            2.65

  
 
 

Three Months Ended September 30, 2024

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts

    

Operating

(Non-

GAAP)

  

Gross Profit

$    8,420

    

$                  192

    

$                        —

    

$               —

    

$          8,612

  

Gross Profit Margin

56.3

%

  

1.3

pts

  

—

pts

  

—

pts

  

57.5

%

SG&A

$    4,911

    

$                 (300)

    

$                        —

    

$               —

    

$          4,611

  

Other (Income) & Expense

2,244

    

—

    

(2,797)

    

—

    

(553)

  

Total Expense & Other (Income)

9,222

    

(300)

    

(2,797)

    

—

    

6,125

  

Pre-tax Income/(Loss) from Continuing

Operations

(802)

    

492

    

2,797

    

—

    

2,487

  

Pre-tax Income Margin from Continuing

Operations

(5.4)

%

  

3.3

pts

  

18.7

pts

  

—

pts

  

16.6

%

Provision for/(Benefit from) Income Taxes (4)

$     (485)

    

$                   119

    

$                     700

    

$               (2)

    

$             332

  

Effective Tax Rate

60.4

%

  

(7.2)

pts

  

(39.8)

pts

  

(0.1)

pts

  

13.4

%

Income/(Loss) from Continuing Operations

$     (317)

    

$                  373

    

$                  2,097

    

$                2

    

$          2,155

  

Income/(Loss) Margin from Continuing

Operations

(2.1)

%

  

2.5

pts

  

14.0

pts

  

0.0

pts

  

14.4

%

Diluted Earnings/(Loss) Per Share: Continuing

Operations (5)

$    (0.34)

    

$                 0.40

    

$                    2.27

    

$           0.00

    

$            2.30

  

____________________

(1)  Includes amortization of acquired intangible assets, in-process R&D, transaction costs, applicable retention, restructuring and related expenses,

       tax charges related to acquisition integration and pre-closing charges, such as financing costs. 

(2)  Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan

       curtailments/settlements and pension insolvency costs and other costs. 2024 also includes the impact of a pension settlement charge.

(3)  2025 includes a one-time, non-cash income tax charge associated with the enactment of H.R. 1 in July of 2025.

(4)  The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to

       the GAAP pre-tax income.

(5)  Due to the GAAP net loss for the three months ended September 30, 2024, dilutive potential shares were excluded from the GAAP loss per share

       as the effect would have been antidilutive. The difference in share count resulted in an additional $(0.04) reconciling item.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)
 
 

Nine Months Ended September 30, 2025

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts (3)

    

Operating

(Non-

GAAP)

  

Gross Profit

$  27,369

    

$                  657

    

$                       —

    

$             —

    

$      28,025

  

Gross Profit Margin

57.2

%

  

1.4

pts

  

—

pts

  

—

pts

  

58.6

%

SG&A

$  14,661

    

$              (1,055)

    

$                       —

    

$             —

    

$      13,606

  

R&D

6,129

    

(4)

    

—

    

—

    

6,125

  

Other (Income) & Expense

(376)

    

(7)

    

(61)

    

—

    

(444)

  

Total Expense & Other (Income)

21,184

    

(1,066)

    

(61)

    

—

    

20,058

  

Pre-tax Income from Continuing Operations

6,185

    

1,723

    

61

    

—

    

7,968

  

Pre-tax Income Margin from Continuing

Operations

12.9

%

  

3.6

pts

  

0.1

pts

  

—

pts

  

16.7

%

Provision for/(Benefit from) Income Taxes (4)

$    1,193

    

$                  396

    

$                        0

    

$         (307)

    

$        1,282

  

Effective Tax Rate

19.3

%

  

0.8

pts

  

(0.2)

pts

  

(3.9)

pts

  

16.1

%

Income from Continuing Operations

$    4,992

    

$               1,326

    

$                      61

    

$          307

    

$        6,686

  

Income Margin from Continuing Operations

10.4

%

  

2.8

pts

  

0.1

pts

  

0.6

pts

  

14.0

%

Diluted Earnings Per Share: Continuing

Operations

$      5.27

    

$                 1.40

    

$                   0.06

    

$         0.32

    

$          7.06

  
 
 

Nine Months Ended September 30, 2024

  
 

Continuing Operations

  
 

GAAP

    

Acquisition-

Related

Adjustments (1)

    

Retirement-

Related

Adjustments (2)

    

Tax

Reform

Impacts (3)

    

Operating

(Non-

GAAP)

  

Gross Profit

$  25,112

    

$                  533

    

$                       —

    

$             —

    

$      25,645

  

Gross Profit Margin

55.6

%

  

1.2

pts

  

—

pts

  

—

pts

  

56.7

%

SG&A

$  14,823

    

$                 (854)

    

$                       —

    

$             —

    

$      13,969

  

Other (Income) & Expense

1,694

    

(68)

    

(2,991)

    

—

    

(1,364)

  

Total Expense & Other (Income)

22,621

    

(922)

    

(2,991)

    

—

    

18,709

  

Pre-tax Income from Continuing Operations

2,491

    

1,454

    

2,991

    

—

    

6,936

  

Pre-tax Income Margin from Continuing

Operations

5.5

%

  

3.2

pts

  

6.6

pts

  

—

pts

  

15.3

%

Provision for/(Benefit from) Income Taxes (4)

$     (597)

    

$                  374

    

$                    731

    

$          434

    

$           942

  

Effective Tax Rate

(24.0)

%

  

10.4

pts

  

20.9

pts

  

6.3

pts

  

13.6

%

Income from Continuing Operations

$    3,088

    

$               1,081

    

$                 2,259

    

$         (434)

    

$        5,994

  

Income Margin from Continuing Operations

6.8

%

  

2.4

pts

  

5.0

pts

  

(1.0)

pts

  

13.3

%

Diluted Earnings Per Share: Continuing

Operations

$      3.30

    

$                 1.16

    

$                   2.42

    

$        (0.46)

    

$          6.41

  

____________________

(1)  Includes amortization of acquired intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax charges

       related to acquisition integration and pre-closing charges, such as financing costs. 2024 also includes a loss of $68 million on foreign exchange

       derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG. 

(2)  Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan

       curtailments/settlements and pension insolvency costs and other costs. 2024 also includes the impact of a pension settlement charge.

(3)  2025 includes a one-time, non-cash income tax charge associated with the enactment of H.R. 1 in July of 2025, and 2024 includes a benefit from

       income taxes due to the resolution of certain tax audit matters in the first quarter.

(4)  Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the

       GAAP pre-tax income.

   

INTERNATIONAL BUSINESS MACHINES CORPORATION

GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION

(Unaudited)
 
   

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

(Dollars in Millions)

  

2025

  

2024

  

2025

  

2024

Net Cash from Operations per GAAP

  

$        3,081

  

$        2,881

  

$      9,153

  

$        9,115
                 

Less: change in IBM Financing receivables

  

298

  

873

  

905

  

1,824
                 

Net cash from operating activities excl. IBM Financing receivables

  

2,783

  

2,009

  

8,248

  

7,292
                 

Capital Expenditures, net

  

(410)

  

55

  

(1,067)

  

(705)
                 

Free Cash Flow

  

$        2,373

  

$        2,064

  

$      7,181

  

$        6,586

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION

(Unaudited)
   

Three Months Ended
September 30,

  

Nine Months Ended
September 30,

(Dollars in Billions)

  

2025

  

2024

  

2025

  

2024

Net Cash Provided by Operating Activities

  

$       3.1

  

$         2.9

  

$       9.2

  

$       9.1
                 

Add:

                

Net interest expense

  

0.3

  

0.3

  

0.9

  

0.7

Provision for/(Benefit from) income taxes from continuing operations

  

0.7

  

(0.5)

  

1.2

  

(0.6)
                 

Less change in:

                

Financing receivables

  

0.3

  

0.9

  

0.9

  

1.8

Other assets and liabilities/other, net (1)

  

(0.8)

  

(2.0)

  

(2.3)

  

(3.5)
                 

Adjusted EBITDA

  

$       4.6

  

$         3.8

  

$     12.7

  

$     10.8

____________________

(1)  Other assets and liabilities/other, net mainly consists of Operating assets and liabilities/Other, net in the Cash Flow chart, workforce 

       rebalancing charges, non-operating impacts and corporate (gains) and charges.

   

SOURCE IBM

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