International Business Machines Corporation ((IBM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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IBM’s recent earnings call painted a picture of robust financial health and strategic growth, underscored by a strong sentiment of optimism. The company reported significant revenue growth across all segments, driven by a strategic focus on AI and hybrid cloud technologies. Despite facing challenges in transaction processing and Red Hat growth, IBM showcased impressive free cash flow and consulting growth, signaling a positive trajectory for the future.
Revenue Growth Acceleration
IBM reported a 7% revenue growth in Q3 2025, marking the highest growth in several years. This acceleration was evident across all segments, showcasing the company’s ability to leverage its diverse portfolio effectively.
Strong Performance in Automation and AI
Software growth accelerated to 9%, with automation leading the charge at a 22% increase. IBM’s Gen AI book of business surpassed $9.5 billion, supported by 200 consulting projects utilizing digital workers at scale.
Infrastructure Growth Driven by z17
Infrastructure delivered a robust performance, growing 15%, driven by the z17 platform. This marks the highest third-quarter revenue for IBM’s infrastructure in nearly two decades.
Record Free Cash Flow
IBM generated $7.2 billion in free cash flow, marking the highest nine-month free cash flow margin in its history. The company expects to reach approximately $14 billion in free cash flow for the year.
Consulting Return to Growth
Consulting returned to growth with a 2% revenue increase, reflecting solid demand for AI services and software-driven delivery models.
Significant Margin Expansion
IBM realized a 290 basis points expansion in adjusted EBITDA margin and raised its full-year expectations for operating pretax margin expansion to over a point.
Decline in Transaction Processing Revenue
Transaction processing revenue declined by 3%, attributed to a temporary shift in client spending priorities towards IBM Z systems.
Challenges in Red Hat Growth
Red Hat revenue grew by 12%, but was impacted by a softening in consumption-based services and a trend towards single-digit growth in Rell.
Consulting Signings Decline
While total consulting signings declined this quarter, the quality of signings improved with more strategic wins.
Forward-Looking Guidance
IBM’s forward-looking guidance remains strong, with the company exceeding expectations in Q3 2025. The company is on track to achieve $4.5 billion in annual productivity savings and maintains a robust liquidity position with $14.9 billion in cash. IBM has raised its full-year expectations for revenue growth to more than 5% and free cash flow to approximately $14 billion, indicating a solid outlook for the remainder of 2025.
In conclusion, IBM’s earnings call highlighted a period of strong financial performance and strategic growth. The positive sentiment was driven by significant revenue growth across all segments, robust free cash flow, and a return to growth in consulting. Despite some challenges, IBM’s focus on AI and hybrid cloud positions it well for continued success.