Yahoo Finance

• Revenue: $14.5 billion, up 2% at constant currency.

• Adjusted EBITDA: $3.4 billion, with a 240 basis points margin expansion.

• Operating Pre-tax Income: $1.7 billion.

• Operating Earnings Per Share: $1.60.

• Free Cash Flow: $2 billion, the highest first quarter free cash flow in many years.

• Software Revenue Growth: Up 9%, with Red Hat up 13% and Automation up 15%.

• Annual Recurring Revenue (ARR) for Software: $21.7 billion, up 11% year-over-year.

• Consulting Revenue: Flat, with a mid-single digit backlog growth.

• Infrastructure Revenue: Declined 4%, with IBM Z down 14%.

• Debt Balance: Over $63 billion, including $10 billion for the financing business.

• Cash Position: $17.6 billion, up $2.8 billion from the end of 2024.

• Full Year Guidance: Maintaining revenue growth of 5%-plus and about $13.5 billion of free cash flow.

• Warning! GuruFocus has detected 3 Warning Sign with CCS.

Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• International Business Machines Corp (NYSE:IBM) reported strong revenue growth, profitability, and cash flow generation, exceeding expectations for the first quarter of 2025.

• The company's Software segment grew by 9%, with notable strength in Red Hat, Automation, Data, and Transaction Processing.

• IBM's generative AI business saw significant traction, with a book of business now over $6 billion, up by $1 billion in the quarter.

• The upcoming launch of the z17 mainframe is expected to deliver enhanced AI capabilities and new security features, resonating well with clients.

• IBM's strategic acquisitions, such as HashiCorp, are expected to integrate well with its hybrid cloud strategy, offering synergy opportunities.

Negative Points

• Consulting revenue was flat, with some clients delaying decision-making, particularly in discretionary projects, impacting in-period signings.

• Infrastructure revenue declined by 4%, with IBM Z down 14% as the company wrapped up the z16 program.

• The macroeconomic environment remains uncertain, with potential impacts on client buying behavior and consulting services.

• IBM's federal consulting business, which is less than 10% of total consulting, could be susceptible to discretionary pullbacks.

• The company is cautious about the contribution from Consulting for the year, given the current economic conditions.

Q & A Highlights

Q: Are you seeing any significant softening in the consumption portion of the Software portfolio, particularly in Red Hat or Transaction Processing? And how is Consulting being impacted by the current macro environment? A: Arvind Krishna, CEO, noted that there was no significant slowdown in the consumption part of the Software business, including Red Hat and Transaction Processing. However, if global GDP slows, there could be a minor impact on Red Hat's consumption business. Consulting is more susceptible to economic pressures, but the impact has been limited so far. James Kavanaugh, CFO, added that the strategic repositioning towards a software-centric model is on track, and Consulting is expected to stabilize.