https://www.wsj.com/business/earnings/ibm-second-quarter-results-rise-on-consulting-infrastructure-strength-2470711b
The tech company’s consulting business saw revenue rise 3% to $5.31 billion
By: Katherine Hamilton
Updated July 23, 2025 4:39 pm ET
International Business Machines’ investments in artificial intelligence are helping it stay agile as customers continue to shift their spending to keep up with a shifting macroeconomic environment.
The tech company’s efforts to diversify both its business model and its customer base paid off in the second quarter. It posted higher sales and profit, bolstered by growth in its cloud software sales. IBM is investing more in artificial intelligence and providing a wider array of services in its software segment to try to stay nimble, Chief Financial Officer Jim Kavanaugh said.
“We’re operating in a very dynamic environment. That’s how I would characterize it,” Kavanaugh said. “But I think that plays to the strengths of IBM overall.”
Revenue rose 8% to $16.98 billion in the second quarter. Analysts surveyed by FactSet forecast revenue of $16.59 billion. Software sales were driven by 16% growth in its hybrid cloud revenue, which includes its Red Hat cloud-management, and increased at a higher rate than the prior quarter. Automation revenue also increased 16%.
In June, IBM launched its new z17 mainframe product, which is used by many of the largest banks and retailers. The new product allows customers to run multimodal predictive generative AI in a hybrid cloud environment. Sales of the Z product helped drive hybrid infrastructure up 21%. That bolstered overall infrastructure revenue, which increased 14% to $4.1 billion, beating analysts’ $3.76 billion forecast.
Its consulting business, which has slowed down in recent years, is still facing challenges, Kavanaugh said. Consulting revenue rose 3% to $5.31 billion during the quarter, while Wall Street was anticipating $5.16 billion.
“Clients are dynamically reprioritizing spending in certain areas,” he said.
To shift with that reprioritization, IBM is pushing its generative AI initiatives, where its book of business is now at $7.5 billion. It added $1.5 billion in the second quarter, up from $1 billion in the first quarter, Kavanaugh said.
Total profit during the quarter was $2.19 billion, or $2.31 a share, up from $1.83 billion, or $1.96 a share, a year earlier. Stripping out certain one-time items, adjusted per-share earnings were $2.80, ahead of the $2.65 forecast by analysts, according to FactSet.
Looking ahead, IBM continues to expect constant currency revenue growth of at least 5%. At current foreign exchange rates, currency is expected to be about a 1.5-point tailwind to growth. Free cash flow is now seen at more than the prior guidance of $13.5 billion for the year.
Kavanaugh said the company is also raising its operating pretax margin guidance by 1 percentage point and increasing its outlook for adjusted earnings before taxes, depreciation and amortization to the low teens.
“That will flow through to profit, earnings and to free cash flow,” Kavanaugh said.