# International Business Machines (IBM) — Financial Analysis

**Exchange:** NYSE  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-12  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/IBM/thesis · /stocks/IBM/memo

## Financial Snapshot

---
ticker: IBM
step: 04
generated: 2026-05-12
source: quick-research
---

### International Business Machines Corp. (IBM) — Financial Snapshot

#### Income Statement Summary

| Metric | FY2023 | FY2024 | FY2025 | YoY (FY25) |
|--------|--------|--------|--------|------------|
| Revenue | $61.9B | $62.8B | ~$66.5B | +6% |
| Operating Pretax Margin | ~16% | ~16% | ~17% | +100 bps |
| Operating Diluted EPS | ~$9.50 | ~$10.30 | ~$11.55 | +12% |
| GAAP EPS | $8.15 | $7.71 | ~$8.50 | +10% |
| Free Cash Flow | $11.1B | $12.7B | $14.7B | +16% (decade high) |

#### Segment Detail (FY2025 quarterly trend → Q3 2025 representative)

| Segment | Quarterly Revenue (Q3 25) | YoY |
|---------|---------------------------|-----|
| Software | $7.2B | +9% |
| - Hybrid Cloud (Red Hat) | ~$1.7B | ~13% |
| - Automation (incl. HashiCorp) | ~$1.7B | +22% |
| - Data and Transaction | ~$2.4B | mid-single-digit |
| - Security | ~$0.5B | mid-single-digit |
| Consulting | ~$5.1B | +1.8% (+0.4% adj for currency) |
| Infrastructure | $3.6B | +15% (z17 cycle) |
| Financing | ~$0.2B | flat |

#### Cash Flow & Capital Allocation (FY2025)

| Metric | Value |
|--------|-------|
| Free Cash Flow | $14.7B (highest in a decade) |
| Capital Expenditures | ~$1.5B |
| Dividends Paid | ~$6.2B (~$1.67/qtr; 30+ consecutive year increases) |
| Share Repurchases | ~$1B (focused on offsetting dilution) |
| Cash & Marketable Securities | ~$14B |
| Total Debt | ~$60B (incl. ~$7B HashiCorp-related) |
| Dividend Yield | ~3.2% |

#### FY2026 Guidance

| Metric | 2026 Guide |
|--------|-----------|
| Revenue Growth | >5% constant currency |
| Software Growth | ~10% |
| Free Cash Flow Increase | ~+$1B YoY (~$15.7B target) |
| Operating Pretax Margin Expansion | ~+100 bps |

#### Key Ratios (approximate)
- P/E: ~22x (FY26 operating EPS) | EV/EBITDA: ~16x | FCF Yield: ~6.2%
- Revenue Growth (FY25): +6% | FCF Margin: ~22%
- Operating Pretax Margin: ~17%
- Dividend Yield: ~3.2% | Payout Ratio: ~50% of FCF
- Net Debt / EBITDA: ~2.5x

#### Growth Profile
FY25 was IBM's strongest year in over a decade — revenue +6%, EPS +12%, FCF +16% to $14.7B (decade high), and operating margin expanded 100 bps. The growth algorithm now works: Software is now the dominant + fastest-growing segment (~9%, ~10% guided FY26), driven by Red Hat + Automation (with HashiCorp boost) + watsonx generative-AI book of business (>$12B). Infrastructure benefits from the z17 mainframe cycle. Consulting remains the laggard at +1–2% but is profitable and stable.

The strategic re-positioning (post-Kyndryl + Watson Health divestitures, post-Red Hat acquisition, now post-HashiCorp) has finally translated to durable mid-single-digit revenue growth + double-digit FCF growth — re-rating IBM from a "yield trap" narrative to a "hybrid cloud + AI compounder."

#### Forward Estimates
FY2026 Guide:
- Revenue: >5% constant currency growth (~$70B)
- FCF: ~$15.7B (+$1B YoY)
- Software: ~10% growth
- Operating Pretax Margin Expansion: ~+100 bps

Bull case: Software accelerates to 12%+ on watsonx ramp + Red Hat strength + HashiCorp synergies; FCF crosses $17B by FY27; multiple expands to mid-20s P/E as AI narrative compounds. Bear case: z17 cycle peaks in 2026 and infrastructure decelerates; Consulting remains weak; watsonx growth disappoints vs. hyperscaler AI; FCF growth slows back to mid-single-digits.

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/IBM/fundamental

## Navigation

- Overview: /stocks/IBM
- Financials (this page): /stocks/IBM/financials
- Thesis: /stocks/IBM/thesis
- Investment Memo: /stocks/IBM/memo
- Coverage universe: /stocks