IBM(US:IBM)2025-07-24 20:16Revenue Performance - Revenue for Q2 2025 was $16.977 billion, a 7.7% increase from $15.770 billion in Q2 2024, with a 5.3% growth adjusted for currency[219]. - For the first six months of 2025, total revenue was $31.519 billion, a 4.3% increase from $30.231 billion in the same period of 2024[233]. - Revenue from continuing operations increased by 7.7% as reported and 5% at constant currency in Q2 2025 compared to the prior year[348]. - For the first six months of 2025, revenue from continuing operations increased by 4.3% as reported and 4% at constant currency compared to the same period in 2024[348]. Income and Earnings - Income from continuing operations for Q2 2025 was $2.193 billion, up 19.8% from $1.830 billion in Q2 2024, with a margin increase of 1.3 points to 12.9%[219][229]. - Operating (non-GAAP) earnings for Q2 2025 were $2.652 billion, a 16.6% increase from $2.275 billion in Q2 2024, with diluted operating earnings per share rising 15.2% to $2.80[221][231]. - Net income from continuing operations was $3.2 billion, reflecting a decrease of 4.6% year-over-year, with a net income margin of 10.3%[242]. - Operating (non-GAAP) earnings for the same period were $4.2 billion, representing an 8.6% increase year-over-year, with diluted operating earnings per share of $4.40, up 7.1%[236][244]. Profit Margins - Gross profit margin for Q2 2025 was 58.8%, an increase of 2.0 points year-over-year, driven by portfolio mix and productivity actions[227]. - The gross margin improved to 57.1%, up 1.9 percentage points from the previous year, with operating (non-GAAP) gross margin at 58.5%, an increase of 2.1 percentage points[239][252]. - Software gross profit margin increased to 83.9% in Q2 2025, with segment profit of $2,296 million, an 8.7% increase[259]. - Infrastructure gross profit for Q2 2025 was $2,548 million, a 23.7% increase from $2,060 million in Q2 2024, with a gross profit margin of 61.5%, up 5.0 points[275]. Expenses - Total expenses increased by 9.6% year-over-year to $7.380 billion, influenced by higher acquisition-related spending and currency effects[228]. - Total expenses increased by 6.4% year-over-year, primarily due to higher acquisition-related costs[240]. - Selling, general and administrative (SG&A) expense for Q2 2025 was $5,027 million, a 1.8% increase from $4,938 million in Q2 2024, with stock-based compensation rising by 41.8%[288]. - Research and development (R&D) expense increased by 13.9% year-over-year in Q2 2025, totaling $2,097 million, driven by investments in AI, hybrid cloud, and quantum technologies[297]. Cash Flow - Cash generated from operations in Q2 2025 was $1.7 billion, a decrease of $0.4 billion compared to Q2 2024, while free cash flow increased by $0.2 billion to $2.8 billion[232]. - Cash generated from operations was $6.1 billion, while free cash flow increased to $4.8 billion, up $0.3 billion compared to the prior year[236][247]. - Free cash flow for the six months ended June 30, 2025, was $4,808 million, an increase of $285 million compared to the prior-year period[320]. Segment Performance - Revenue from Software grew by 9.6% as reported and 7.6% adjusted for currency, with strong performance in Hybrid Cloud, Automation, and Data[225]. - Hybrid Cloud (Red Hat) revenue growth accelerated in Q2 2025, with OpenShift growing over 20% and Automation revenue increasing 16.2% as reported[256]. - Consulting revenue for Q2 2025 was $5,314 million, a 2.6% increase as reported, with Intelligent Operations growing 4.8%[263]. - Infrastructure revenue in Q2 2025 was $4,142 million, up 13.6% as reported, driven by a 70.2% increase in IBM Z revenue[273]. Balance Sheet and Liquidity - The company maintained a strong liquidity position with total assets of $148.585 billion as of June 30, 2025, up 8.3% from December 31, 2024[233]. - The company’s balance sheet remained strong with cash and cash equivalents totaling $15.5 billion, an increase of $0.7 billion from the end of 2024[245]. - Total debt increased to $64,165 million as of June 30, 2025, reflecting an increase of $9,192 million compared to December 31, 2024, primarily due to debt issuances[331]. Acquisitions and Investments - The company invested $7,845 million in acquisitions during the first half of 2025, primarily for the acquisition of HashiCorp[320]. - The acquisition of HashiCorp contributed to an increase in goodwill and intangible assets, impacting total assets which rose by $11.4 billion[246]. - The company launched IBM z17 and IBM Power11 in 2025, enhancing AI capabilities and performance for mission-critical workloads[340]. Tax and Interest - The operating (non-GAAP) provision for income taxes in Q2 2025 was $545 million, compared to $516 million in Q2 2024, reflecting an increase in tax obligations[311]. - Interest expense rose by 19.3% year-over-year in Q2 2025, reaching $510 million, influenced by higher average interest rates and increased debt balance[305]. - The effective tax rate for the six months ended June 30, 2025, was 13.5%, a decrease of 2.2 percentage points from the previous year[378]. Risks and Challenges - The company continues to face risks related to economic downturns, innovation failures, and integration challenges from acquisitions[381].