IBM Stock Jumps as AI Business Powers Blowout Quarter

TLDR

Table of Contents

IBM reported Q4 2025 revenue of $19.69 billion, beating analyst projections by $460 million
Artificial intelligence book of business topped $12.5 billion with consulting segment recording its largest GenAI quarter
Software revenue climbed 14% to $9 billion while infrastructure jumped 21% to $5.1 billion
Free cash flow reached $14.7 billion for 2025, the strongest annual performance in over ten years
Shares rose 8% following earnings announcement and 2026 guidance calling for continued growth

IBM just dropped earnings that caught everyone off guard. The company posted fourth-quarter revenue of $19.69 billion on January 28, 2026, sailing past the $19.23 billion estimate.

$IBM (International Business Machines) #earnings are out: pic.twitter.com/uWUofjKlsk

— The Earnings Correspondent (@earnings_guy) January 28, 2026

Earnings per share came in at $4.52 adjusted. Analysts had expected $4.32. That’s a solid beat on both the top and bottom lines.

Net income nearly doubled to $5.6 billion from $2.92 billion in the year-ago period. For the full year, IBM generated revenue of $67.5 billion, up 6% from 2024.

International Business Machines Corporation, IBM

The real story was cash generation. IBM produced $14.7 billion in free cash flow during 2025, up 16% and the best showing in more than a decade.

CEO Arvind Krishna pointed to the company’s artificial intelligence momentum. The GenAI book of business now stands at more than $12.5 billion. “This capped a strong 2025 for IBM where we exceeded expectations for revenue, profit and free cash flow,” Krishna said.

Software and Infrastructure Lead the Charge

Software delivered the quarter’s strongest performance. Revenue grew 14% to $9 billion in Q4. Growth accelerated to 11% with over 7 percentage points from organic expansion.

Annual recurring revenue reached $23.6 billion in software. That’s more than $2 billion higher than the end of 2024. Data offerings grew 19% while automation solutions jumped 14%.

Infrastructure surprised everyone. Revenue increased 21% to $5.1 billion. IBM Z mainframe systems grew 67% year-over-year as customers adopted z17 systems with built-in AI capabilities.

Consulting turned things around after a weak start to 2025. Q4 revenue hit $5.3 billion, up 1% year-over-year. Full-year consulting revenue totaled $21.1 billion.

The consulting team booked over $2 billion in GenAI business during Q4 alone. Total inception-to-date GenAI bookings in consulting now exceed $10.5 billion. The consulting backlog stands at $32 billion, up 2%.

Strong Guidance Points to Continued Growth

IBM expects 2026 revenue growth to exceed 5% at constant currency. Software is projected to accelerate to 10% growth, driven by organic initiatives.

Operating pre-tax income margin should expand by about a point. Free cash flow is expected to increase by roughly $1 billion year-over-year.

Krishna revealed IBM is on track to deliver its first large-scale quantum computer by 2029. This positions the company in quantum computing alongside its AI push.

The board approved a dividend of $1.68 per share, payable March 10. This will mark 110 consecutive years of quarterly dividends.

IBM stock jumped 8% following the earnings release. Adjusted EBITDA margin expanded by about 230 basis points for the year. The company achieved $4.5 billion in productivity savings at the 2025 exit run rate.

Red Hat products contributed to software gains. The hybrid cloud category grew 8% year-over-year, aligning with IBM’s strategy as a software-led hybrid cloud and AI platform company.

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