IBM (IBM) Q3 2025 earnings summary

Executive summary

• Q3 2025 revenue reached $16.3 billion, up 9% year-over-year, with all segments accelerating and net income from continuing operations at $1.7 billion.

• Profit and free cash flow exceeded expectations, driven by strong AI and hybrid cloud demand, with significant client adoption and internal productivity gains.

• Diluted EPS from continuing operations was $1.84 (GAAP) and $2.65 (operating, non-GAAP), up 15% year-over-year.

• Raised full-year guidance for revenue growth to over 5% and free cash flow to about $14 billion.

• GenAI book of business surpassed $9.5 billion inception-to-date, with Consulting generative AI bookings over $1.5 billion in the quarter.

Financial highlights

• Q3 revenue was $16.3B (+9% year-over-year, +7% at constant currency); adjusted EBITDA grew 22% to $4.6B.

• Gross profit margin improved to 57.3% (GAAP) and 58.7% (operating, non-GAAP), with pre-tax margin at 14.9% (GAAP).

• Free cash flow for the first nine months was $7.2B, the highest nine-month margin in reported history.

• Operating earnings per share increased 15% year-over-year to $2.65.

• Segment profit margins expanded: Infrastructure +420 bps, Software +270 bps, Consulting +200 bps.

Outlook and guidance

• Full-year revenue growth expected to exceed 5%, with mid-teens adjusted EBITDA growth and free cash flow of about $14 billion.

• Software revenue growth approaching double digits for the year; Automation and Red Hat expected to maintain strong momentum.

• Infrastructure to contribute over 1.5 points to overall revenue growth, with continued strength in z17.

• Consulting expected to maintain growth, with Q4 revenue performance similar to Q3.

• Operating pre-tax margin expansion raised to over 100 basis points for the year.