IBM (IBM) Q2 2025 earnings summary

Executive summary

• Q2 2025 revenue reached $17.0B, up as much as 8% year-over-year, with net income of $2.2B and operating EPS of $2.80, led by strong growth in Software and Infrastructure, especially in hybrid cloud and AI offerings.

• Gross profit margin expanded to 58.8% GAAP (up 200 bps) and 60.1% operating (up 230 bps), with double-digit profit growth and the highest first-half free cash flow margin in years.

• Generative AI book of business surpassed $7.5B, with accelerating demand and expanded partnerships to scale AI and automation offerings.

• Completed major acquisitions including HashiCorp and DataStax, enhancing hybrid cloud and real-time AI data capabilities.

• Launched new products such as z17 mainframe, Power11, and expanded Watsonx, reinforcing innovation and market leadership.

Financial highlights

• Q2 2025 revenue: $17.0B (+7.7% year-over-year); adjusted EBITDA $4.7B (up 16%); operating pre-tax income $3.2B; operating EPS $2.80 (up 15%).

• Software revenue grew up to 10% to $7.4B; Red Hat up 14%; Automation up 14%; Infrastructure revenue up as much as 14% to $4.1B; IBM Z up 70%.

• Free cash flow for H1 2025 was $4.8B, with Q2 free cash flow at $2.8B; highest first-half margin in years.

• Gross profit for Q2 was $10.0B, up from $8.95B a year ago; GAAP gross margin 58.8%, operating margin 60.1%.

• Debt at quarter-end was $64.2B, including $11.7B for financing; cash and marketable securities at $15.5B.

Outlook and guidance

• Full-year revenue growth expected to exceed 5% at constant currency, with free cash flow guidance raised to above $13.5B.

• Software revenue growth anticipated to approach double digits, Red Hat expected to grow in the mid-teens.

• Transaction Processing expected to see low single-digit growth; infrastructure to contribute about 1.5 points to overall revenue growth.

• Operating pre-tax margin expected to expand by about a point for the full year.

• One-time, non-cash tax charge expected in Q3 2025 due to new U.S. tax law, not impacting non-GAAP net income or EPS.