IBM(US:IBM) The Economic Times·2025-10-22 22:18Core Insights - IBM's shares fell over 6% in after-hours trading due to modest growth in its software division during the latest quarter [1][12] - The company reported software revenues of $7.2 billion for the September quarter, aligning with analyst expectations [2][13] - Overall revenue for the September quarter reached $16.3 billion, a 9% increase year-over-year, surpassing the FactSet consensus of $16.1 billion [6][14] Software Division Performance - Within the software segment, hybrid-cloud revenue, including Red Hat, increased by 14%, automation revenue rose by 24%, data revenue grew by 8%, while transaction processing declined by 1% [2][14] - Analysts noted that Red Hat's performance is critical for IBM's software growth, with its revenue growth on a constant-currency basis at 12%, down from 14% in the previous quarter [4][3] Analyst Perspectives - Analysts highlighted the importance of IBM's software growth, particularly in the context of the "seasonally weak" third quarter [3][4] - Jefferies analyst Brent Thill emphasized that IBM's software momentum will heavily depend on Red Hat, which is seen as a cornerstone of IBM's software growth strategy [4][3] Future Outlook - For the full year, IBM anticipates revenue growth of over 5% in constant currency and free cash flow of $14 billion, exceeding Wall Street's estimate of $13.6 billion [9][15] - CEO Arvind Krishna stated that the company has accelerated performance across all segments and highlighted the valuation of IBM's AI business at over $9.5 billion [7][14] Strategic Initiatives - IBM is focusing on AI demand and strategic partnerships, with over 70 AI workflows for various sectors, which are expected to drive growth in the coming quarters [10][15] - The company is positioned as a primary beneficiary of increasing global investments across both organic and inorganic verticals, leveraging its scalable and open foundation for innovation [11][15]