Key facts
- IBM's preliminary second-quarter revenue was $17.2 billion, below the expected $17.86 billion.
- The company's actual reported second-quarter revenue was $17.0 billion.
- IBM's shares fell 14% in premarket trading following the revenue miss.
- Software revenue grew 10% year-over-year, while infrastructure revenue increased 14%.
- Consulting revenue saw a 3% increase year-over-year.
- IBM raised its full-year outlook for free cash flow, expecting it to exceed $13.5 billion.
IBM shares fell 14% in premarket trading on Tuesday after the company announced preliminary second-quarter revenue of $17.2 billion, falling short of analysts' expectations of $17.86 billion. The company later reported its official second-quarter 2025 results, with revenue at $17.0 billion, an increase of 8% year-over-year (5% at constant currency).
Software revenue grew 10% year-over-year (8% at constant currency), driven by strong performance in Red Hat and HashiCorp, and Infrastructure revenue increased 14% (11% at constant currency), boosted by a strong start for the new IBM Z. Consulting revenue saw a 3% increase year-over-year, remaining flat at constant currency, impacted by the demand environment.
IBM's Chairman, President, and CEO Arvind Krishna highlighted the company's differentiated market position due to deep innovation and expertise, particularly in helping clients deploy and scale AI, with a generative AI book of business exceeding $7.5 billion. CFO James Kavanaugh noted that strong first-half performance, driven by revenue growth, portfolio mix, and productivity initiatives, led to significant margin expansion and double-digit profit growth.
The company raised its full-year outlook for free cash flow, now expecting it to exceed $13.5 billion. IBM's GAAP gross profit margin was 58.8%, up 200 basis points, while operating (non-GAAP) gross profit margin was 60.1%, up 230 basis points. GAAP pre-tax income margin was 15.3%, up 120 basis points, and operating (non-GAAP) pre-tax income margin was 18.8%, up 110 basis points.