Core Points - Dr. Leon Stok has been elected Chair of the Si2 Board of Directors for the remainder of the 2025–2026 term [1] - Dr. Stok has been a member of the Si2 Board since 2007 and has held various leadership roles, including previous terms as Board Chair [2] - Si2 is a global, not-for-profit membership organization with around 70 corporate members focused on reducing development costs and increasing design productivity in the semiconductor industry [4] Company and Industry Summary - Dr. Stok leads a team at IBM that develops advanced design and verification tools for high-performance computing systems, including IBM Z, Power systems, and Quantum Systems [2] - Dr. Stok is a recognized leader in electronic design automation (EDA) with over 60 published papers and 13 patents in the field [3] - The Si2 Board consists of 16 members from leading semiconductor foundries, fabless companies, and EDA software providers, promoting industry standards and shared solutions [4]

Core Insights - IBM is recognized as a legacy tech company with significant segments including software, consulting, and infrastructure [1] Group 1: Company Overview - IBM Z is highlighted as one of the top choices in its category, indicating its strong market position [1] Group 2: Investment Strategy - The focus is on growth stocks, particularly those integrating AI into their operations and possessing a competitive advantage in their sector [1] - The investment strategy emphasizes identifying stocks with high growth potential that are undervalued in the market, aiming to build a portfolio centered on growth rather than fear of missing out (FOMO) [1]

Core Viewpoint - IBM's valuation is significantly lower compared to large tech companies, which reassures analysts. The company remains a meaningful allocation in the overall IT portfolio, not for valuation expansion, but as a defensive buffer that provides dividends while analysts position themselves in SaaS and large tech stocks [1]. Financial Performance - IBM has demonstrated strong execution in its AI, hybrid cloud, and IBM Z infrastructure business lines, achieving stable growth in revenue, profit margins, and free cash flow. However, since April, the stock has risen significantly, leading analysts to question whether there are any new changes not yet priced in [2]. - The core software business growth is maintaining a double-digit level, albeit slightly below the fourth quarter of 2024 [3]. - The Red Hat business continues to grow, but the growth rate has slightly slowed from 16%-17% to approximately 14% [4]. - Consulting business revenue has stabilized, shifting from a year-over-year decline of 2% to a growth of 2% [6]. - Infrastructure support business revenue is flat or slightly increased, contributing stability to total revenue and EBITDA, but without significant acceleration in trends [7]. Business Segments - The automation business has made significant progress, with growth accelerating from about 15% to approximately 24%, indicating potential for substantial margin improvement [7]. - Data and AI business growth has also increased moderately, from 4%-5% in Q4 2024 to 8% currently [7]. - The hybrid infrastructure business has rebounded significantly, with IBM Z business reversing from a 20% year-over-year decline to a 61% growth in Q3 2025 [7]. - The narrative around automation, AI, and IBM Z reflects a bullish sentiment in the market, with most optimistic expectations being reasonable [7]. Revenue and EBITDA Insights - The overall revenue growth guidance for 2025 exceeds 5%, suggesting a year-over-year growth of about 3% in Q4, which is a slowdown compared to the nearly double-digit growth in the first two quarters [9]. - EBITDA growth is positive, with a year-over-year increase of approximately 21% in Q3 2025, compared to 7%-8% in Q3 2024 [10]. - Since April, IBM's valuation has increased by 20%-25%, from about 14.5 times to approximately 17.5 times forward EBITDA [11]. Investment Logic - The current investment logic for IBM remains consistent with that of April, indicating a reasonable valuation. The potential uplift from AI business is promising, but the best-case scenario for EBITDA improvement seems to be already priced in [17]. - The AI business focuses on enterprise-level solutions, integrating AI into software, consulting, and infrastructure to drive incremental growth and margin improvement, but faces competition from large tech companies and specialized AI providers [17]. - The dividend yield and defensive attributes of IBM make it a quality stock to hold, but analysts do not recommend adding new funds given the missed opportunity from April to October [17].

Financial Performance Highlights - IBM's revenue grew by over 7% year-over-year[14] - Adjusted EBITDA increased by 22%[14] - Operating earnings per share grew by 15%[14] - Free cash flow year-to-date grew by 9%[14] - The company is raising its full-year free cash flow outlook to approximately $14 billion[22] Segment Performance - Software revenue increased by 9%, with Automation growing by 22% and Hybrid Cloud by 12%[16] - Infrastructure revenue increased by 15%, driven by a 59% increase in IBM Z revenue[18] - Consulting revenue increased by 2%[20], with over $1.5 billion in GenAI bookings in the quarter[19] Key Metrics and Outlook - The GenAI book of business now exceeds $9.5 billion[11] - The company is raising revenue growth expectations to over 5%[22] - Adjusted EBITDA growth is expected to be in the mid-teens[22]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported revenue of $17 billion, adjusted EBITDA of $4.7 billion, operating pretax income of $3.2 billion, and operating earnings per share of $2.8, with revenue growth exceeding 5% at constant currency [19][20] - The company generated $4.8 billion in free cash flow in the first half, marking the highest first half free cash flow margin in many years, with adjusted EBITDA growth of 16% and operating earnings per share growth of 15% [19][26] Business Line Data and Key Metrics Changes - Software revenue grew by 8%, with annual recurring revenue (ARR) reaching $22.7 billion, up 10% year-over-year, and Red Hat's growth accelerated to 14% [20][29] - Infrastructure revenue increased by 11%, driven by a 67% rise in IBM Z, while consulting revenue remained flat, stabilizing in the first half [21][22] - Transaction processing revenue declined by 2%, reflecting client prioritization of hardware spending at the beginning of the new Z17 program [20][21] Market Data and Key Metrics Changes - The hybrid infrastructure segment grew by 19%, while distributed infrastructure revenue decreased by 17% due to product cycle dynamics [21] - The consulting backlog increased by 4% year-over-year, indicating a healthy demand environment despite a challenging pricing landscape [22] Company Strategy and Development Direction - The company's strategy focuses on hybrid cloud and artificial intelligence, supported by five key elements: client trust, flexible platforms, sustained innovation, deep domain expertise, and a broad ecosystem [9] - The company aims to achieve accelerating revenue growth of over 5% for the full year and has raised its free cash flow expectations to above $13.5 billion [18][28] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macroeconomic environment, noting strong demand for technology that enhances productivity and reduces costs [6][52] - The company anticipates continued growth in software and infrastructure, with a focus on AI and automation driving transformation for clients [10][30] Other Important Information - The company closed the acquisition of DataStax, enhancing its real-time scalable data capabilities to support AI-driven applications [17] - The company introduced new capabilities across its portfolio, including enhancements to WatsonX and the launch of Z17, its most advanced mainframe [13][15] Q&A Session Summary Question: Can you elaborate on software trends and organic growth? - Management confirmed that organic growth in software has decelerated but remains confident in approaching 10% growth for the year, driven by strong performance in Red Hat and automation [36][39] Question: What are customer spending priorities in the current macro environment? - Management noted that customers are prioritizing AI and technology investments to improve efficiency and reduce costs, with a strong focus on modernization and digital transformation [52][101] Question: Why not raise guidance despite strong performance? - Management emphasized a conservative approach, highlighting that while performance has exceeded expectations, they prefer to maintain guidance to account for uncertainties in the second half of the year [61][70] Question: What is the outlook for software growth heading into 2026? - Management expressed confidence in maintaining or improving growth rates in software, driven by strong demand for Red Hat, automation, and AI solutions [74][80] Question: How is AI impacting customer spending in non-AI areas? - Management indicated that AI investments are largely incremental, with some cannibalization occurring in traditional consulting areas, but overall, AI is enhancing the value of existing products [92][96]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported revenue of $17 billion, adjusted EBITDA of $4.7 billion, and operating pre-tax income of $3.2 billion, with operating earnings per share at $2.8 [18] - Revenue growth exceeded 5% at constant currency, with adjusted EBITDA growth of 16% and operating earnings per share growth of 15% [19][27] - Free cash flow for the first half reached $4.8 billion, marking the highest first half free cash flow margin in many years [25] Business Line Data and Key Metrics Changes - Software revenue grew 8%, with annual recurring revenue (ARR) increasing to $22.7 billion, up 10% year-over-year [20] - Red Hat's growth accelerated to 14%, driven by strong demand for hybrid cloud solutions [20] - Infrastructure revenue increased by 11%, with hybrid infrastructure up 19% and IBM Z revenue up 67% due to the strong start of the Z17 program [21] - Consulting revenue remained flat, with Intelligent Operations revenue growing 2% and Strategy and Technology declining by 2% [22] Market Data and Key Metrics Changes - The company noted strong demand for technology across various regions, including Japan, South Asia, and the Middle East, with enterprise technology expected to grow in the 5% to 7% range [51] - The geopolitical environment has led some clients to adopt a cautious approach, but overall spending is expected to remain robust [6][7] Company Strategy and Development Direction - The company's strategy focuses on hybrid cloud and artificial intelligence, supported by five key elements: client trust, flexible platforms, sustained innovation, deep domain expertise, and a broad ecosystem [8] - The company is expanding its partner ecosystem to deliver AI at scale, with collaborations announced with major firms like Oracle, AWS, and Microsoft [11] - The company aims to achieve approximately $4.5 billion in annual run rate savings by the end of 2025, enhancing operational efficiency [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment, highlighting strong demand for technology and the potential for long-term growth [50] - The company raised its expectations for free cash flow to above $13.5 billion for the year, reflecting confidence in its ability to deliver sustainable, profitable growth [17][27] - Management acknowledged the dynamic environment but emphasized the strength of the company's portfolio and disciplined strategy [31] Other Important Information - The company closed the acquisition of DataStax, enhancing its capabilities in real-time scalable data for AI-driven applications [16] - The launch of the Z17 mainframe is expected to drive future growth, with significant advancements in AI inference operations [14] Q&A Session Summary Question: Can you elaborate on software trends and organic growth? - Management confirmed that organic growth in software has decelerated but remains confident in approaching double-digit growth for the year, driven by Red Hat and automation [34][36] Question: What are customer spending priorities in the current environment? - Management noted that customers are prioritizing AI and technology investments to improve efficiency and reduce costs, with a strong focus on modernization [49][52] Question: Why not raise guidance despite positive trends? - Management explained that while they are optimistic, they prefer to maintain a conservative approach, ensuring they meet expectations for the remainder of the year [57][66] Question: What is the outlook for software growth heading into 2026? - Management expressed confidence in maintaining or improving growth rates in software, driven by strong demand for Red Hat and automation solutions [70][72] Question: How is AI impacting customer spending in non-AI areas? - Management indicated that AI investments are largely incremental, enhancing existing products and services rather than cannibalizing other areas [88][92]

Core Insights - Spiking is participating in IBM Z Day: Special Edition, showcasing its AI-driven financial technology and TradeGPT as a transformative force in capital markets [1][6] - The event will feature a groundbreaking keynote announcement unveiling a new AI chip that TradeGPT will utilize for enhanced performance [2][3] - Spiking's CEO emphasizes the significance of this event for enterprise innovation and the potential of TradeGPT to deliver real-time capital market decisions [3][4] Event Highlights - The event will include specialized technical tracks and curated experiential journeys for attendees [2] - Participants can earn up to four prestigious IBM digital skills badges, enhancing their professional expertise [2] - The latest IBM mainframe, zNext, will support TradeGPT with up to 8x on-chip AI processors per core, improving scale, speed, and security [5] Strategic Alignment - Spiking aims to scale its operations to volumes comparable to OpenAI, leveraging IBM's latest offerings for enterprise-scale solutions [4][6] - The collaboration with IBM provides a platform for connecting with global thought leaders and showcasing innovations in AI, hybrid cloud, and post-quantum security [6] Company Overview - Spiking is recognized as a leader in AI-driven financial technology, providing real-time, intelligent solutions for capital markets through its flagship product, TradeGPT [8]