Acceleration in revenue growth and profit across all segments; Raises outlook for full-year revenue growth and free cash flow
IBM (NYSE: IBM) today announced third-quarter 2025 earnings results.
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“This quarter we accelerated performance across all of our segments, and again exceeded expectations for revenue, profit and free cash flow. Clients globally continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI. Our AI book of business now stands at more than $9.5 billion,” said Arvind Krishna, IBM chairman, president and chief executive officer. “Given the strength of our business, we are raising our full-year outlook for revenue growth and free cash flow.”
Third-Quarter Highlights
— Revenue – Revenue of $16.3 billion, up 9 percent, up 7 percent at constant currency – Software revenue up 10 percent, up 9 percent at constant currency – Consulting revenue up 3 percent, up 2 percent at constant currency – Infrastructure revenue up 17 percent, up 15 percent at constant currency
— Profit – Gross Profit Margin: GAAP: 57.3 percent, up 1.1 points; Operating (Non-GAAP): 58.7 percent, up 1.2 points – Pre-Tax Income Margin: GAAP: 14.9 percent, up 20.2 points; Operating (Non-GAAP): 18.6 percent, up 2.0 points
— Cash Flow – Year to date, net cash from operating activities of $9.2 billion; free cash flow of $7.2 billion
THIRD-QUARTER 2025 INCOME STATEMENT SUMMARY Revenue Gross Gross Pre-tax Pre-tax Net Diluted Profit Profit Income Income Income Earnings Margin Margin Per ShareGAAP from $ 16.3 B $ 9.4 B 57.3 % $ 2.4 B 14.9 % $ 1.7 B (2) $ 1.84 (2)ContinuingOperationsYear/Year 9 % (1) 11 % 1.1 Pts NM (3) 20.2 Pts (3) NM (2,3) NM (2,3)Operating $ 9.6 B 58.7 % $ 3.0 B 18.6 % $ 2.5 B $ 2.65(Non-GAAP)Year/Year 11 % 1.2 Pts 22 % 2.0 Pts 17 % 15 %(1) 7% at constant currency.(2) 2025 GAAP results include a one-time, non-cash income tax charge associated with the enactment ofH.R.1 in July of 2025.(3) GAAPYTYresults include the impact of a pension settlement charge in third-quarter 2024.NM – not meaningful
“New innovation, the strength and diversity of our portfolio, and our disciplined execution led to acceleration in revenue growth and profit in the quarter,” said James Kavanaugh, IBM senior vice president and chief financial officer. “Consistent focus on the fundamentals of our business delivered double-digit growth in adjusted EBITDA, and drove another quarter of strong free cash flow, the fuel for our investments and ability to return value to shareholders.”
Segment Results for Third Quarter
— Software – revenues of $7.2 billion, up 10 percent, up 9 percent at constant currency: – Hybrid Cloud (Red Hat) up 14 percent, up 12 percent at constant currency – Automation up 24 percent, up 22 percent at constant currency – Data up 8 percent, up 7 percent at constant currency – Transaction Processing down 1 percent, down 3 percent at constant currency
— Consulting – revenues of $5.3 billion, up 3 percent, up 2 percent at constant currency: – Strategy and Technology up 2 percent, flat at constant currency – Intelligent Operations up 5 percent, up 4 percent at constant currency
— Infrastructure – revenues of $3.6 billion, up 17 percent, up 15 percent at constant currency: – Hybrid Infrastructure up 28 percent, up 26 percent at constant currency –IBM Z up 61 percent, up 59 percent at constant currency –Distributed Infrastructure up 10 percent, up 8 percent at constant currency – Infrastructure Support up 1 percent, flat at constant currency
— Financing – revenues of $0.2 billion, up 10 percent, up 8 percent at constant currency
Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from operating activities of $3.1 billion, up $0.2 billion year to year. IBM's free cash flow was $2.4 billion, up $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the third quarter.
For the first nine months of the year, the company generated net cash from operating activities of $9.2 billion, flat year to year. IBM's free cash flow was $7.2 billion, up $0.6 billion year to year.
IBM ended the third quarter with $14.9 billion of cash, restricted cash and marketable securities, up $0.1 billion from year-end 2024. Debt, including IBM Financing debt of $11.3 billion, totaled $63.1 billion, up $8.1 billion year to date.
Full-Year 2025 Expectations
— Revenue: The company now expects constant currency revenue growth of more than 5 percent. At current foreign exchange rates, currency is expected to be about a one-and-a-half-point tailwind to growth for the year.
— Free cash flow: The company now expects about $14 billion in free cash flow for the full year.
Dividend Declaration
On October 22, 2025, the IBM board of directors approved a regular quarterly cash dividend of $1.68 per common share, to stockholders of record on November 10, 2025. With payment of the December 10, 2025 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI and generative AI, including the company's increased offerings and use of AI-based technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity, privacy, and AI considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.
Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Press Release
For generative AI, book of business includes inception to date Software transactional revenue, plus new SaaS Annual Contract Value and Consulting signings related to specific offerings. The generative AI book of business is further defined within Exhibit 99.2 in the Form 8-K that includes this press release.
In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:
IBM results –
— adjusting for currency (i.e., at constant currency);
— presenting operating (non-GAAP) earnings per share amounts and related income statement items;
— free cash flow;
— net cash from operating activities excluding IBM Financing receivables;
— adjusted EBITDA.
The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-3q25. Presentation charts will be available shortly before the Webcast.
Financial Results Below(certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).
Contact: IBM Tim Davidson, 914-844-7847 tfdavids@us.ibm.com
Erin McElwee, 347-920-6825 erin.mcelwee@ibm.com
INTERNATIONAL BUSINESS MACHINES CORPORATIONCOMPARATIVE FINANCIAL RESULTS(Unaudited; Dollars in millions except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024REVENUE BY SEGMENTSoftware $ 7,209 $ 6,524 $ 20,932 $ 19,162Consulting 5,324 5,152 15,706 15,517Infrastructure 3,559 3,042 10,586 9,764Financing 200 181 557 543Other 38 68 68 214TOTAL REVENUE 16,331 14,968 47,849 45,199GROSS PROFIT 9,360 8,420 27,369 25,112GROSS PROFIT MARGINSoftware 83.1 % 83.2 % 83.5 % 83.1 %Consulting 29.3 % 28.4 % 28.0 % 26.7 %Infrastructure 57.2 % 55.0 % 57.7 % 55.3 %Financing 45.6 % 47.2 % 45.7 % 48.2 %TOTAL GROSS PROFIT MARGIN 57.3 % 56.3 % 57.2 % 55.6 %EXPENSE AND OTHER INCOMESG&A 4,748 4,911 14,661 14,823R&D 2,082 1,876 6,129 5,512Intellectual property and custom development income (219) (238) (687) (696)Other (income) and expense (1) (173) 2,244 (376) 1,694Interest expense 492 429 1,457 1,288TOTAL EXPENSE AND OTHER INCOME 6,931 9,222 21,184 22,621INCOME/(LOSS) FROM CONTINUING OPERATIONS 2,430 (802) 6,185 2,491BEFORE INCOME TAXESPre-tax margin 14.9 % (5.4) % 12.9 % 5.5 %Provision for/(Benefit from) income taxes (1) 686 (485) 1,193 (597)Effective tax rate 28.2 % 60.4 % 19.3 % (24.0) %INCOME/(LOSS) FROM CONTINUING OPERATIONS $ 1,744 $ (317) $ 4,992 $ 3,088DISCONTINUED OPERATIONSIncome/(loss) from discontinued operations, net of 0 (13) 1 21taxesNET INCOME/(LOSS) (1) $ 1,744 $ (330) $ 4,993 $ 3,109EARNINGS/(LOSS) PER SHARE OF COMMON STOCK (1)Assuming DilutionContinuing Operations $ 1.84 $ (0.34) $ 5.27 $ 3.30Discontinued Operations $ 0.00 $ (0.01) $ 0.00 $ 0.02TOTAL $ 1.84 $ (0.36) $ 5.27 $ 3.32BasicContinuing Operations $ 1.87 $ (0.34) $ 5.36 $ 3.36Discontinued Operations $ 0.00 $ (0.01) $ 0.00 $ 0.02TOTAL $ 1.87 $ (0.36) $ 5.36 $ 3.38WEIGHTED-AVERAGE NUMBER OF COMMON SHARESOUTSTANDING (M's)Assuming Dilution 948.9 923.6 947.4 935.4Basic 933.9 923.6 930.9 920.3____________________(1) 2024 includes the impact of a pension settlement charge of $2.7 billion ($2.0 billion net of tax).
INTERNATIONAL BUSINESS MACHINES CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEET(Unaudited)(Dollars in Millions) At September 30, At December 31, 2025 2024ASSETS:Current Assets:Cash and cash equivalents $ 11,569 $ 13,947Restricted cash 30 214Marketable securities 3,286 644Notes and accounts receivable – trade, net 5,532 6,804Short-term financing receivablesHeld for investment, net 5,156 6,259Held for sale 745 900Other accounts receivable, net 1,174 947Inventories 1,397 1,289Deferred costs 1,113 959Prepaid expenses and other current assets 2,739 2,520Total Current Assets 32,740 34,482Property, plant and equipment, net 5,851 5,731Operating right-of-use assets, net 3,223 3,197Long-term financing receivables, net 6,258 5,353Prepaid pension assets 8,044 7,492Deferred costs 768 788Deferred taxes 8,505 6,978Goodwill 67,396 60,706Intangibles, net 11,729 10,660Investments and sundry assets 1,796 1,787Total Assets $ 146,312 $ 137,175LIABILITIES:Current Liabilities:Taxes $ 1,663 $ 2,033Short-term debt 7,942 5,089Accounts payable 3,867 4,032Compensation and benefits 3,508 3,605Deferred income 13,878 13,907Operating lease liabilities 807 768Other liabilities 3,477 3,709Total Current Liabilities 35,142 33,142Long-term debt 55,174 49,884Retirement-related obligations 9,735 9,432Deferred income 3,863 3,622Operating lease liabilities 2,646 2,655Other liabilities 11,762 11,048Total Liabilities 118,322 109,783EQUITY:IBM Stockholders' Equity:Common stock 62,819 61,380Retained earnings 151,581 151,163Treasury stock – at cost (170,512) (169,968)Accumulated other comprehensive income/(loss) (15,983) (15,269)Total IBM Stockholders' Equity 27,905 27,307Noncontrolling interests 85 86Total Equity 27,990 27,393Total Liabilities and Equity $ 146,312 $ 137,175
INTERNATIONAL BUSINESS MACHINES CORPORATIONCASH FLOW(Unaudited) Three Months Ended Nine Months Ended September 30, September 30,(Dollars in Millions) 2025 2024 2025 2024Net Income/(Loss) from Operations $ 1,744 $ (330) $ 4,993 $ 3,109Pension Settlement Charge – 2,725 – 2,725Depreciation/Amortization of Intangibles (1) 1,283 1,268 3,725 3,555Stock-based Compensation 444 330 1,285 966Operating assets and liabilities/Other, net (2) (688) (1,984) (1,755) (3,063)IBM Financing A/R 298 873 905 1,824Net Cash Provided by Operating Activities $ 3,081 $ 2,881 $ 9,153 $ 9,115Capital Expenditures, net of payments & proceeds (3) (410) 55 (1,067) (705)Divestitures, net of cash transferred – 2 (1) 705Acquisitions, net of cash acquired (58) (2,513) (7,903) (2,748)Marketable Securities / Other Investments, net 30 869 (2,748) (810)Net Cash Provided by/(Used in) Investing Activities $ (437) $ (1,587) $ (11,719) $ (3,558)Debt, net of payments & proceeds (1,108) (1,259) 4,683 (777)Dividends (1,569) (1,542) (4,681) (4,601)Financing – Other (334) 35 (425) (26)Net Cash Provided by/(Used in) Financing Activities $ (3,012) $ (2,766) $ (423) $ (5,403)Effect of Exchange Rate changes on Cash (59) 207 429 (29)Net Change in Cash, Cash Equivalents and Restricted Cash $ (426) $ (1,264) $ (2,561) $ 125____________________(1) Includes operating lease right-of-use assets amortization.(2) 2025 includes a one-time, non-cash income tax charge of $0.3 billion associated with the enactment ofH.R. 1 in July of 2025, and2024includes a $0.7 billion tax benefit associated with the pension settlement charge in the third quarter.(3) 2024 includes proceeds of $0.4 billion from the sale of certainQRadarSaaS assets in the third quarter.
INTERNATIONAL BUSINESS MACHINES CORPORATIONGAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION(Unaudited) Three Months Ended Nine Months Ended September 30, September 30,(Dollars in Billions) 2025 2024 Yr/Yr 2025 2024 Yr/YrNet Income (Loss) as reported (GAAP) (1) $ 1.7 $ (0.3) $ 2.1 $ 5.0 $ 3.1 $ 1.9Less: Income/(Loss) from discontinued operations, net of tax 0.0 0.0 0.0 0.0 0.0 0.0Income/(Loss) from continuing operations 1.7 (0.3) 2.1 5.0 3.1 1.9Provision for/(Benefit from) income taxes from continuing ops. 0.7 (0.5) 1.2 1.2 (0.6) 1.8Pre-tax income/(loss) from continuing operations (GAAP) 2.4 (0.8) 3.2 6.2 2.5 3.7Non-operating adjustments (before tax)Acquisition-related charges (2) 0.6 0.5 0.1 1.7 1.5 0.3Non-operating retirement-related costs/(income) (1) 0.0 2.8 (2.8) 0.1 3.0 (2.9)Operating (non-GAAP) pre-tax income from continuing ops. 3.0 2.5 0.5 8.0 6.9 1.0Net interest expense 0.3 0.3 0.1 0.9 0.7 0.3Depreciation/Amortization of non-acquired intangible assets 0.7 0.7 0.0 2.1 2.1 0.0Stock-based compensation 0.4 0.3 0.1 1.3 1.0 0.3Workforce rebalancing charges 0.0 0.3 (0.3) 0.4 0.7 (0.3)Corporate (gains) and charges (3) 0.0 (0.4) 0.4 0.0 (0.6) 0.6Adjusted EBITDA $ 4.6 $ 3.8 $ 0.8 $ 12.7 $ 10.8 $ 1.8____________________(1) 2024 includes the impact of a pension settlement charge of $2.7 billion ($2.0 billion net of tax).(2) Primarily consists of amortization of acquired intangible assets.(3) Corporate (gains) and charges primarily consists of unique corporate actions such as gains on divestitures and asset sales (e.g., certainQRadarSaaS assets in 2024).
INTERNATIONAL BUSINESS MACHINES CORPORATIONSEGMENT DATA(Unaudited) Three Months Ended September 30, 2025(Dollars in Millions) Software Consulting Infrastructure FinancingRevenue $ 7,209 $ 5,324 $ 3,559 $ 200Segment Profit $ 2,374 $ 686 $ 644 $ 123Segment Profit Margin 32.9 % 12.9 % 18.1 % 61.6 %Change YTY Revenue 10.5 % 3.3 % 17.0 % 10.4 %Change YTY Revenue – Constant Currency 8.8 % 1.5 % 15.1 % 8.5 % Three Months Ended September 30, 2024(Dollars in Millions) Software Consulting Infrastructure FinancingRevenue $ 6,524 $ 5,152 $ 3,042 $ 181Segment Profit $ 1,969 $ 559 $ 422 $ 86Segment Profit Margin 30.2 % 10.9 % 13.9 % 47.5 % Nine Months Ended September 30, 2025(Dollars in Millions) Software Consulting Infrastructure FinancingRevenue $ 20,932 $ 15,706 $ 10,586 $ 557Segment Profit $ 6,517 $ 1,807 $ 1,857 $ 371Segment Profit Margin 31.1 % 11.5 % 17.5 % 66.5 %Change YTY Revenue 9.2 % 1.2 % 8.4 % 2.7 %Change YTY Revenue – Constant Currency 8.4 % 0.2 % 7.7 % 2.6 % Nine Months Ended September 30, 2024(Dollars in Millions) Software Consulting Infrastructure FinancingRevenue $ 19,162 $ 15,517 $ 9,764 $ 543Segment Profit $ 5,582 $ 1,447 $ 1,387 $ 254Segment Profit Margin 29.1 % 9.3 % 14.2 % 46.9 %
INTERNATIONAL BUSINESS MACHINES CORPORATIONU.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION(Unaudited; Dollars in millions except per share amounts) Three Months Ended September 30, 2025 Continuing Operations GAAP Acquisition- Retirement- Tax Operating Related Related Reform (Non- Adjustments (1) Adjustments (2) Impacts (3) GAAP)Gross Profit $ 9,360 $ 231 $ – $ – $ 9,591Gross Profit Margin 57.3 % 1.4 pts – pts – pts 58.7 %SG&A $ 4,748 $ (354) $ – $ – $ 4,394Other (Income) & Expense (173) (6) (13) – (191)Total Expense & Other (Income) 6,931 (359) (13) – 6,559Pre-tax Income from Continuing Operations 2,430 590 13 – 3,033Pre-tax Income Margin fromContinuing 14.9 % 3.6 pts 0.1 pts – pts 18.6 %OperationsProvision for/(Benefit from) Income Taxes (4) $ 686 $ 136 $ 3 $ (309) $ 516Effective Tax Rate 28.2 % (1.0) pts 0.0 pts (10.2) pts 17.0 %Income from Continuing Operations $ 1,744 $ 454 $ 10 $ 309 $ 2,517Income Margin from Continuing Operations 10.7 % 2.8 pts 0.1 pts 1.9 pts 15.4 %Diluted Earnings Per Share: Continuing $ 1.84 $ 0.48 $ 0.01 $ 0.33 $ 2.65Operations Three Months Ended September 30, 2024 Continuing Operations GAAP Acquisition- Retirement- Tax Operating Related Related Reform (Non- Adjustments (1) Adjustments (2) Impacts GAAP)Gross Profit $ 8,420 $ 192 $ – $ – $ 8,612Gross Profit Margin 56.3 % 1.3 pts – pts – pts 57.5 %SG&A $ 4,911 $ (300) $ – $ – $ 4,611Other (Income) & Expense 2,244 – (2,797) – (553)Total Expense & Other (Income) 9,222 (300) (2,797) – 6,125Pre-tax Income/(Loss) from Continuing (802) 492 2,797 – 2,487OperationsPre-tax Income Margin from Continuing (5.4) % 3.3 pts 18.7 pts – pts 16.6 %OperationsProvision for/(Benefit from) Income Taxes (4) $ (485) $ 119 $ 700 $ (2) $ 332Effective Tax Rate 60.4 % (7.2) pts (39.8) pts (0.1) pts 13.4 %Income/(Loss) from Continuing Operations $ (317) $ 373 $ 2,097 $ 2 $ 2,155Income/(Loss) Margin from Continuing (2.1) % 2.5 pts 14.0 pts 0.0 pts 14.4 %OperationsDiluted Earnings/(Loss) Per Share: Continuing $ (0.34) $ 0.40 $ 2.27 $ 0.00 $ 2.30Operations(5)____________________(1) Includes amortization of acquired intangible assets, in-process R&D, transaction costs, applicable retention, restructuring and related expenses,tax charges related to acquisition integration and pre-closing charges, such as financing costs.(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plancurtailments/settlements and pension insolvency costs and other costs. 2024 also includes the impact of a pension settlement charge.(3) 2025 includes a one-time, non-cash income tax charge associated with the enactment ofH.R.1 in July of 2025.(4) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied tothe GAAP pre-tax income.(5) Due to the GAAP net loss for the three months ended September 30, 2024, dilutive potential shares were excluded from the GAAP loss per shareas the effect would have beenantidilutive. The difference in share count resulted in an additional $(0.04) reconciling item.
INTERNATIONAL BUSINESS MACHINES CORPORATIONU.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION(Unaudited; Dollars in millions except per share amounts) Nine Months Ended September 30, 2025 Continuing Operations GAAP Acquisition- Retirement- Tax Operating Related Related Reform (Non- Adjustments (1) Adjustments (2) Impacts (3) GAAP)Gross Profit $ 27,369 $ 657 $ – $ – $ 28,025Gross Profit Margin 57.2 % 1.4 pts – pts – pts 58.6 %SG&A $ 14,661 $ (1,055) $ – $ – $ 13,606R&D 6,129 (4) – – 6,125Other (Income) & Expense (376) (7) (61) – (444)Total Expense & Other (Income) 21,184 (1,066) (61) – 20,058Pre-tax Income from Continuing Operations 6,185 1,723 61 – 7,968Pre-tax Income Margin from Continuing 12.9 % 3.6 pts 0.1 pts – pts 16.7 %OperationsProvision for/(Benefit from) Income Taxes (4) $ 1,193 $ 396 $ 0 $ (307) $ 1,282Effective Tax Rate 19.3 % 0.8 pts (0.2) pts (3.9) pts 16.1 %Income from Continuing Operations $ 4,992 $ 1,326 $ 61 $ 307 $ 6,686Income Margin from Continuing Operations 10.4 % 2.8 pts 0.1 pts 0.6 pts 14.0 %Diluted Earnings Per Share: Continuing $ 5.27 $ 1.40 $ 0.06 $ 0.32 $ 7.06Operations Nine Months Ended September 30, 2024 Continuing Operations GAAP Acquisition- Retirement- Tax Operating Related Related Reform (Non- Adjustments (1) Adjustments (2) Impacts (3) GAAP)Gross Profit $ 25,112 $ 533 $ – $ – $ 25,645Gross Profit Margin 55.6 % 1.2 pts – pts – pts 56.7 %SG&A $ 14,823 $ (854) $ – $ – $ 13,969Other (Income) & Expense 1,694 (68) (2,991) – (1,364)Total Expense & Other (Income) 22,621 (922) (2,991) – 18,709Pre-tax Income from Continuing Operations 2,491 1,454 2,991 – 6,936Pre-tax Income Margin from Continuing 5.5 % 3.2 pts 6.6 pts – pts 15.3 %OperationsProvision for/(Benefit from) Income Taxes (4) $ (597) $ 374 $ 731 $ 434 $ 942Effective Tax Rate (24.0) % 10.4 pts 20.9 pts 6.3 pts 13.6 %Income from Continuing Operations $ 3,088 $ 1,081 $ 2,259 $ (434) $ 5,994Income Margin from Continuing Operations 6.8 % 2.4 pts 5.0 pts (1.0) pts 13.3 %Diluted Earnings Per Share: Continuing $ 3.30 $ 1.16 $ 2.42 $ (0.46) $ 6.41Operations____________________(1) Includes amortization of acquired intangible assets, in process R&D, transaction costs, applicable restructuring and related expenses, tax chargesrelated to acquisition integration and pre-closing charges, such as financing costs. 2024 also includes a loss of $68 million on foreign exchangederivative contracts entered into by the company prior to the acquisition ofStreamSetsandwebMethodsfrom Software AG.(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plancurtailments/settlements and pension insolvency costs and other costs. 2024 also includes the impact of a pension settlement charge.(3) 2025 includes a one-time, non-cash income tax charge associated with the enactment ofH.R.1 in July of 2025, and 2024 includes a benefit fromincome taxes due to the resolution of certain tax audit matters in the first quarter.(4) Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to theGAAP pre-tax income.
INTERNATIONAL BUSINESS MACHINES CORPORATIONGAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION(Unaudited) Three Months Ended Nine Months Ended September 30, September 30,(Dollars in Millions) 2025 2024 2025 2024Net Cash from Operations per GAAP $ 3,081 $ 2,881 $ 9,153 $ 9,115Less: change in IBM Financing receivables 298 873 905 1,824Net cash from operating activities excl. IBM Financing receivables 2,783 2,009 8,248 7,292Capital Expenditures, net (410) 55 (1,067) (705)Free Cash Flow $ 2,373 $ 2,064 $ 7,181 $ 6,586
INTERNATIONAL BUSINESS MACHINES CORPORATIONGAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION(Unaudited) Three Months Ended Nine Months Ended September 30, September 30,(Dollars in Billions) 2025 2024 2025 2024Net Cash Provided by Operating Activities $ 3.1 $ 2.9 $ 9.2 $ 9.1Add:Net interest expense 0.3 0.3 0.9 0.7Provision for/(Benefit from) income taxes from continuing operations 0.7 (0.5) 1.2 (0.6)Less change in:Financing receivables 0.3 0.9 0.9 1.8Other assets and liabilities/other, net (1) (0.8) (2.0) (2.3) (3.5)Adjusted EBITDA $ 4.6 $ 3.8 $ 12.7 $ 10.8____________________(1) Other assets and liabilities/other, net mainly consists of Operating assets and liabilities/Other, net in the Cash Flow chart, workforcerebalancingcharges, non-operating impacts and corporate (gains) and charges.
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