IBM Stock: AI Push Drives Revenue Past Wall Street Estimates

TLDR

• IBM reported Q4 2025 revenue of $19.7 billion, up 9% year-over-year, beating Wall Street estimates
• GenAI book of business surpassed $12.5 billion, with consulting segment booking over $2 billion in Q4 alone
• Software segment grew 11% in Q4 with annual recurring revenue reaching $23.6 billion
• Full-year free cash flow hit $14.7 billion, up 16% and the highest level in over a decade
• IBM expects 2026 revenue growth above 5% with software growth accelerating to 10%

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IBM wrapped up 2025 with a bang. The tech giant reported fourth-quarter revenue of $19.7 billion on January 28, 2026, representing a 9% jump from the same period last year.

The results crushed Wall Street expectations. Analysts had penciled in $19.23 billion for revenue. Instead, IBM delivered $19.69 billion.

Earnings per share came in at $4.52 adjusted, beating the $4.32 estimate. Net income reached $5.6 billion, or $5.88 per share, nearly doubling from $2.92 billion a year earlier.

International Business Machines Corporation, IBM

For the full year, IBM posted revenue of $67.5 billion. That’s a 6% increase from 2024. More impressive was the free cash flow generation of $14.7 billion, marking a 16% rise and the strongest performance in more than a decade.

CEO Arvind Krishna pointed to the company’s generative AI momentum as a key driver. 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 stated.

Software Segment Powers Growth

The software division delivered the standout performance. Revenue climbed 14% to $9 billion in the fourth quarter alone. For Q4, growth accelerated to 11%, with over 7 percentage points coming from organic expansion.

Annual recurring revenue in software reached $23.6 billion. That’s more than $2 billion higher than where it stood at the end of 2024. Data offerings grew 19% year-over-year, while automation solutions jumped 14%.

The GenAI book within software exceeded $2 billion inception-to-date. This shows real customer adoption beyond just promises and pilots.

Red Hat products contributed to the software gains. The hybrid cloud category in software grew 8% year-over-year, aligning with IBM’s strategic push into cloud and AI platforms.

Infrastructure also posted strong numbers. Revenue increased 21% to $5.1 billion in Q4. The IBM Z mainframe systems line exploded with 61% growth, translating to 67% year-over-year expansion for the quarter.

Consulting Rebounds After Slow Start

The consulting segment turned a corner after struggling earlier in the year. Q4 revenue hit $5.3 billion, up 1% year-over-year. Full-year consulting revenue totaled $21.1 billion, inching up 0.4%.

The consulting team delivered its largest GenAI bookings quarter ever. More than $2 billion in new business came through the door. Total inception-to-date GenAI bookings in consulting now exceed $10.5 billion.

The consulting backlog stands at $32 billion, up 2% at actual rates. This provides visibility into future revenue streams and suggests demand remains solid.

IBM’s adjusted EBITDA margin expanded by about 230 basis points. That represents 17% growth for the fiscal year. The company also generated productivity savings of $4.5 billion at the 2025 exit run rate.

Looking ahead to 2026, IBM projects revenue growth will sustain above 5% at constant currency. Software revenue growth is expected to accelerate to 10%, led by organic initiatives.

Operating pre-tax income margin should expand by about a point. Free cash flow is projected to increase by roughly $1 billion year-over-year, representing high single-digit growth.

Krishna also revealed during the earnings call that IBM is on track to deliver its first large-scale quantum computer by 2029. This positions the company in another emerging technology category alongside its AI push.

The board approved a dividend of $1.68 per share, payable March 10. When paid, this will mark 110 consecutive years of quarterly dividends. IBM stock jumped 8% in trading following the results, though aftermarket trading showed a more modest 0.1% gain to $294.

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