IBM delivers strong Q4, 12% revenue growth

IBM delivered fourth quarter revenue growth of 12% as it saw strength in infrastructure courtesy of mainframes and software sales. IBM said its book of business for AI is more than $12.5 billion.

The company reported fourth quarter earnings of $5.6 billion, or $5.86 a share, on revenue of $19.7 billion. Non-GAAP earnings were $4.52 a share.

Wall Street was expecting IBM to report non-GAAP fourth quarter earnings of $4.29 a share on revenue of $19.21 billion.

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CEO Arvind Krishna said:

"We enter 2026 with momentum and in a position of strength, giving us confidence in our full-year expectations of more than 5 percent constant currency revenue growth and an increase of about $1 billion in year-over-year free cash flow."

In the fourth quarter, software revenue was up 14% with consulting revenue up 3% and infrastructure revenue up 21%. IBM's next-gen mainframe platform is surging.

For 2025, IBM delivered revenue of $67.5 billion, up 8%, with net income of $10.6 billion.

As for the outlook, IBM is projecting constant currency revenue growth of 5% or more. Free cash flow will be up about $1 billion.

Speaking on IBM's earnings call, Krishna said:

• "As we look at the evolution of AI, our opportunity is to make it easy for clients to build AI that is specific to their data, their processes and their competitive needs, including the effective use of smaller, more efficient models where they make sense."
• "AI is also a powerful productivity driver for IBM, contributing to our strong financial performance. In 2023, we set out on a goal to achieve $2 billion of productivity savings exiting 2024. And today, we are well ahead of that, exiting 2025 with $4.5 billion of annual run rate savings."
• "Accelerating organic innovation is a core focus for IBM. Project Bob is IBM's next-generation AI-based software development system designed to transform developer productivity. Bob introduces intelligent orchestration between industry-leading frontier models such as Anthropic Claude and Mistral, small language models, including IBM Granite and custom models all optimized for cost and performance. We have more than 20,000 IBM-ers that are using Project Bob, reporting productivity gains averaging 45%, a powerful client zero use case."
• "Automation is on a secular demand increase. The reason for that is as people have more and more infrastructure, they put more and more AI, they put more and more compute, they need that software to help them manage all of it."
• "There is a lot more demand for people to have sovereignty or on-premise control, which goes along with the economics of the mainframe platform. I think more and more clients have woken up to that for certain workloads, the mainframe is actually the lowest unit cost economics platform, and that is really important."