IBM Stock Surges as Software and Infrastructure Drive 8% Revenue Boost

IBM has reported its financial results for the second quarter of 2025, highlighting a robust performance across its business segments, particularly in Software and Infrastructure. The company posted revenues of $17 billion, reflecting an 8% increase from the previous year and a 5% rise at constant currency. Software revenues grew by 10% (8% at constant currency), driven by strong performances in Hybrid Cloud and Automation, both of which saw a 16% increase. Infrastructure revenues surged 14%, or 11% at constant currency, with IBM Z showing a significant boost of 70% at constant currency.

IBM's gross profit margin showed an improvement, registering 58.8% under GAAP, which signifies a growth of 200 basis points, and 60.1% on an operating (non-GAAP) basis, increasing 230 basis points. Pre-tax income margin also increased, reaching 15.3% GAAP and 18.8% operating (non-GAAP).

The company reported a net income of $2.2 billion from continuing operations, reflecting a 20% year-over-year increase. Diluted earnings per share came in at $2.31 on a GAAP basis and $2.80 on an operating (non-GAAP) basis, marking rises of 18% and 15% respectively.

Operational cash flow for the quarter stood at $1.7 billion, though this is a $0.4 billion decrease compared to the previous year. Free cash flow, however, was slightly up year-over-year at $2.8 billion. Year-to-date, the operational cash flow was $6.1 billion, with free cash flow reaching $4.8 billion, which reflects improvement over the same period last year.

IBM ended the quarter with a cash reserve, including restricted cash and marketable securities, of $15.5 billion, an increase of $0.7 billion from December 2024. Total debt, inclusive of IBM Financing debt, stood at $64.2 billion, indicating a rise of $9.2 billion within the year.

In terms of guidance, IBM has raised its expectations for full-year free cash flow, now anticipating it to exceed $13.5 billion, with a constant currency revenue growth projection of at least 5%. The current foreign exchange rates indicate a mild tailwind to growth of approximately one and a half points for the full year. Analysts predict continued demand for IBM's AI solutions, which could support revenue growth in the coming quarters.

The firm also announced its board's approval of a regular quarterly cash dividend of $1.68 per common share, payable on September 10, 2025, marking another step in IBM's century-long tradition of returning value to its shareholders through dividends.