International Business Machines Corporation · NYSE:IBM
International Business Machines — Investor Day (February 2025)
108 slides from International Business Machines's investor day presentation, Feb 4, 2025
Slide 1: IBM Investor Day 2025
IBM Investor Day 2025 Exhibit 99.1
Slide 2: Today's Presenters
Today’s Presenters Arvind Krishna Chairman, President & CEO Matt Hicks President & CEO, Red Hat Ric Lewis SVP, Infrastructure Rob Thomas SVP, Software and Chief Commercial Officer Jay Gambetta VP of Quantum, IBM Fellow Olympia McNerney Global Head of IR Mohamad Ali SVP, IBM Consulting James Kavanaug
Slide 3: Agenda
Agenda Opening Remarks Olympia McNerney Transformation and Vision Arvind Krishna AI Strategy Matt Hicks & Ritika Gunnar Software Rob Thomas Consulting Mohamad Ali Infrastructure Ric Lewis Break Quantum Jay Gambetta Financial Model James Kavanaugh Q&A
Slide 4: Forward-looking statements and non-GAAP information
Forward-looking statements and non-GAAP information Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Forward- looking statements are based on the company’s current assumptions regarding future business and
Slide 5: Transformation and Vision
Transformation and Vision Arvind Krishna Chairman, President and Chief Executive Officer
Slide 6: IBM is reshaping how businesses operate
IBM is reshaping how businesses operate 93% of all Fortune 500 companies leverage IBM’s hybrid cloud products and solutions >$5B AI book of business across Software and Consulting ~80% of IBM’s revenue from clients who purchase across Software, Consulting, and Infrastructure Leading in hybrid cloud
Slide 7: Delivered on our mid-term model targets
Delivered on our mid-term model targets Met revenue growth across all segments Exceeded profitability targets Achieved highest FCF margin in history in 2024 $63B 2024 revenue $12.7B 2024 free cash flow 7 All data as of end of 2024 Note 1
Slide 8: Our flywheel for growth
Our flywheel for growth Client Trust Incumbency over 100 years, powering mission-critical solutions Hybrid Cloud & AI Leadership The de facto platform for hybrid cloud; early leadership position in AI Domain Expertise Helping clients design, deploy, and drive ROI Ecosystem Multiplier Leveraging our
Slide 9: Strategy positioned around two transformative technological shifts
Our strategy is uniquely positioned around two transformative technological shifts new applications by 202821B+ 73% of companies use hybrid cloud today1 in annual productivity gains driven by AI by 20303$4.4T of all AI deployments will use containers by 2027475% Hybrid Cloud + AI 9 1 Flexera 2 1 Bil
Slide 10: Technology is the ultimate enabler of our clients' growth
Technology is the ultimate enabler of our clients’ growth 10 Business innovation Deploying new technology to evolve and scale for growth amidst disruption Operational efficiency Optimizing internal processes and resources to meet demands, including talent gaps Strategic flexibility Managing data and
Slide 11: IBM's leading solutions deliver value to clients
IBM’s leading solutions deliver value to clients 11 GenAI watsonx infused throughout, driving growth through productivity Hybrid Cloud Managing distributed IT environments Automation Data Domain Expertise IBM Z and Transaction Processing Optimizing for complexity and cost Eliminating complexity and
Slide 12: Red Hat is the de facto standard for hybrid cloud
Red Hat is the de facto standard for hybrid cloud Significant growth since acquisition announcement $1.7T Hybrid cloud opportunity1 Top 3 Market share in containers – across cloud and on-prem2 1 Hybrid cloud software, hardware and IT services market in 2025, per IDC Black Book, December 2024 2 World
Slide 13: Our AI strategy focuses on transparent and efficient enterprise solutions
Open Cost Efficient Hybrid Domain Expertise Driving rapid innovation leveraging the developer community Enterprise-ready fit for purpose models with 90% better cost efficiency Fulfilling and optimizing the need for sovereignty and flexibility Accelerating client adoption and experience Our AI strate
Slide 14: IBM's integrated portfolio addresses enterprise AI needs
IBM’s integrated portfolio addresses enterprise AI needs 14
Slide 15: Strong momentum in GenAI
Our approach is driving strong momentum in GenAI GenAI book of business, inception to date Note 9 15
Slide 16: Synergies across platforms accelerate our value to clients
Synergies across platforms accelerate our value to clients Hybrid cloud migration Data management Improved operational efficiency Modernized IT footprint Container-based architecture Application development Digital payment enablement Scalable customer experience Customized generative AI Data curatio
Slide 17: We've created a culture that fosters growth and performance
Risk tolerance Fostering a culture of accountability and working with clients to take shared, calculated risks 2 Speed Empowering teams to accelerate innovation and delivery of solutions 1 Talent Strengthening recruiting and retention with revamped incentives and emphasis on technical skills 3 We’ve
Slide 18: Delivering a new era of innovation at IBM
Delivering a new era of innovation at IBM Increased R&D to 12% from 9%1 Accelerating innovation speed 1 Represents FY expense to revenue ratio, from 2020 (as-reported in 2020 10-K) to 2024 2 As of Q4, 2024 Note 6, 9 18 Infrastructure 120% z16 program to program growth2 Consulting >$4B GenAI bookings
Slide 19: Focused acquisition and divestiture strategy
75% Of acquisition spend on software ~1-2pts Points of revenue growth driven by acquisitions Augmented by a focused acquisition and divesture strategy July 2019 June 2021 August 2023 July 2024 Pending November 2021 February 2024 December 2024 November 2020 December 2022 Dates indicate transaction cl
Slide 20: Ecosystem multiplier through our partner network
Created an ecosystem multiplier through our partner network Managed Service Providers Distribution & Resell Partners Consultancies & System Integrators Developer Community Independent Software Vendors Ecosystem GenAI partners Strategic partners 20
Slide 21: Portfolio optimization and cost discipline
Driving value through portfolio optimization and cost discipline 1 Annualized exit run rate 2 2020 data as-reported in 2020 10-K Note 2 PTI Margin Promoting focus and efficiency across our business Optimizing the portfolio with an emphasis on growth Infusing generative AI at scale as client zero Gro
Slide 22: Driving value for shareholders
119% total shareholder returns, trailing three years2 ~75pts ahead of the S&P 500, trailing three years2 >$130B value created, trailing three years2,3 29 years of consecutive dividend increases Driving value for shareholders We are delivering sustainable revenue and free cash flow growth 1 2018-2020
Slide 23: IBM is committed to maximizing value for shareholders
IBM is committed to maximizing value for shareholders A radically different company Focused Hybrid Cloud and AI portfolio aligned to client needs + a culture of growth and performance Accelerating revenue growth to 5%+ Proven repositioning, on path to accelerate growth Delivering FCF growth > revenu
Slide 24: AI Strategy
AI Strategy Matt Hicks Chief Executive Officer, Red Hat Ritika Gunnar General Manager, Data
Slide 25: Enterprise AI is an attractive AI market
Enterprise AI is an attractive AI market Total Enterprise AI spend ($B) Sizable and rapidly growing market1… … despite early days of generative AI2 1 IDC Worldwide AI & Generative AI Spending Guide, September 2024, IDC, Doc #US52520724 2 BCG “Where’s the Value in AI” Oct 2024, N=1,000 25 of enterpri
Slide 26: Solving enterprise pain points will accelerate adoption
Solving enterprise pain points will accelerate adoption 1 Customer Perspectives on AI-ready Infrastructure Priorities, March 2024, IDC, Doc #US51664624 2 Deloitte “State of Generative AI in the Enterprise Q3” Aug 2024 3 IBM IBV “The CEO’s guide to generative AI” Jul 2023 26 85% Companies seeking alt
Slide 27: Our AI strategy focuses on transparent and efficient enterprise solutions
Open Cost Efficient Hybrid Domain Expertise Driving rapid innovation leveraging the developer community Enterprise-ready fit for purpose models with 90% better cost efficiency Fulfilling and optimizing the need for sovereignty and flexibility Accelerating client adoption and experience Our AI strate
Slide 28: Open: driving rapid innovation
Open: Driving rapid innovation leveraging the developer community 1 IDC Quarterly Enterprise Infrastructure Tracker, May 2024, IDC, Doc #US52098824 2 Stanford Institute for Human-Centered AI (2024). AI Index report 2024. Stanford University. 3 Refer to Exhibit 99.2 to the company’s Form 8-K furnishe
Slide 29: Cost Efficient: better cost performance
Cost Efficient: Orders of magnitude better cost performance Analysis by IBM Research 29 ...running on the most economic AI stack Smaller open models delivering better performance at a fraction of the price... Granite 7B + InstructLab vs. ChatGPT 4 Turbo Use case: financial planning vs. Llama 3 70B U
Slide 30: Hybrid: fulfilling sovereignty, optimizing for flexibility
Hybrid: Fulfilling sovereignty, optimizing for flexibility 1 IBM Report Mastering Hybrid Cloud, 2022 2 IBM Corporate Strategy analysis 30 Multiple silos drive IT and business complexity… 84% 63% of executives struggle with eliminating operational silos¹ of clients need to integrate data silos across
Slide 31: Domain Expertise: to drive client adoption
Domain Expertise: To drive client adoption and experience IBM Technology is directly embedding domain expertise… Market forecast: Enterprise GenAI models with domain specificity1 …to accelerate productivity and evolve workflows with watsonx agents and assistants 1 Gartner 31 IBM Consulting is delive
Slide 32: IBM's integrated portfolio addresses enterprise AI needs
IBM’s integrated portfolio addresses enterprise AI needs 32
Slide 33: watsonx solves enterprise AI adoption challenges
watsonx solves enterprise AI adoption challenges Automate Business Processes Solve the Enterprise GenAI Data Problem Empower Clients to Scale GenAI Take out complexity through GenAI-driven automation Only 1% of enterprise data is represented in models1 Govern and manage GenAI to achieve scale Accele
Slide 34: Why industry leaders choose IBM watsonx
Why industry leaders choose IBM watsonx watsonx 34 watsonx Assistant watsonx Granite models watsonx Client satisfaction scaling watsonx Assistant across 11M customer footprint Productivity projected from AI and Automation value creation Cost efficient easy-to-deploy Granite models Expertise in real-
Slide 35: Proof points of a winning strategy
Proof points of a winning strategy Market Traction IBM Multiplier >$5B AI book of business across Consulting and Software ~5-6x Software and Consulting multiplier for every $ of watsonx 1 Gartner 2024 Magic Quadrants for Gen AI Model Providers and AI Knowledge Management Apps/General Productivity 2
Slide 36: Software
Software Rob Thomas Senior Vice President, Software and Chief Commercial Officer
Slide 37: Track record of acceleration in Software
Track record of acceleration in Software ~80% recurring revenue in 2024 ~6pts organic growth in 2024 ~$1B GenAI book of business inception to date across Software 1 2020 figures using reported amounts in IBM’s 2021 10-K Note 6, 7, 9 Software Revenue growth 20201 2024 17% 41% Software Rule of 40 2020
Slide 38: Software makes technology your advantage
Software makes technology your advantage of organizations believe hybrid environments are optimal for managing applications and data2 80%+ 73% of companies use hybrid cloud today1 of models in 2027 will be domain specific vs. just 1% in 2023350% of executives says AI will enable business model innov
Slide 39: IBM is recognized as a leader in Hybrid Cloud and AI
IBM is recognized as a leader in Hybrid Cloud and AI Gartner Magic Quadrant for… − Access Management − API Management − Augmented Data Quality Solutions − Cloud AI Developer Services − Cloud Financial Management Tools − Container Management (Red Hat) − Data Integration Tools − Security Information a
Slide 40: End-to-end enterprise capabilities for Hybrid Cloud and AI
IBM’s portfolio delivers end-to-end enterprise capabilities for Hybrid Cloud and AI Containers | Virtualization | DevOps Operating System | Applications Application Integration | Networking | Resiliency Asset Lifecycle Management | FinOps | Observability AI Assistants | AI Governance | AI Models Dat
Slide 41: Our market leading products are fueling our growth
Our market leading products are fueling our growth… 2024 Revenue Key drivers Revenue growth % Modeled based on the new reported revenue categories, which will be effective 1Q25 1 Gartner, How to Run Containers and Kubernetes in Production, 2024 Note 6, 11 9% total Software growth in 2024 41 Hybrid C
Slide 42: Strong momentum in Red Hat
…with strong momentum in Red Hat Significant wins in OpenShift Virtualization Red Hat’s market leading products drive growth Strong demand for operational efficiencies of standardizing on one operating system Taming operational complexity through automation RHELOpenShift Neural Magic adds advanced m
Slide 43: We have entered a new era of innovation
Ansible Lightspeed Device Edge Granite 1.0 Apptio App Connect Hybrid Cloud Mesh SevOne AIOps StepZen Manta Data Lineage OpenPages watsonx.ai watsonx.data watsonx.gov watsonx Code Assistant Storage Ceph Storage Defender watsonx Code Assistant for Z Hybrid Cloud Automation Data Transaction Processing
Slide 44: We have created an innovation culture in IBM Software
We have created an innovation culture in IBM AI and Tools One platform for SaaS, leveraging OpenShift AI for Code to accelerate development: 6% of code generated by AI today to 25%+ in the future Productivity and Speed Adopted industry leading productivity metrics: Development Frequency, Lead Time f
Slide 45: IBM is a trusted partner for thousands of companies
IBM is a trusted partner for thousands of companies across the globe New logosLong time clients 45
Slide 46: Unlocking value for the enterprise
And we are unlocking value for the enterprise 46 AI 33% increase in agent productivity AI-powered virtual assistant Hybrid Cloud >40% reduction in cost Modernized SAP infrastructure AI AI for payments Embedding watsonx in apps
Slide 47: Go-to-market engine focuses on technical and experiential engagement
Our go-to-market engine focuses on technical and experiential engagement to deliver value Go-to-market momentum – Simplified model and incentives – Invested in Client Engineering and Customer Success – Focused on strategic partnerships and growth markets Client expansion – Hybrid Cloud and AI synerg
Slide 48: Software's role in IBM's flywheel for growth
Build on early GenAI leadership with ~$1B book of business – driving a ~5-6x watsonx multiplier opportunity Software’s role in IBM’s flywheel for growth Focused portfolio around hybrid cloud and AI, delivering 9% growth in 2024 and accelerating Red Hat momentum through market share gains and AI + vi
Slide 49: Consulting
Consulting Mohamad Ali Senior Vice President, Consulting
Slide 50: A leading global consultancy
A leading global consultancy 75 115 266,000 135,000 100% >85 Countries that we serve our clients in1 Client Innovation Centers, Design Studios, Security Operations Centers, and Cyber Ranges as part of our Global Network2 IBM Technology and Strategic Partner certifications earned across Adobe, AWS, M
Slide 51: Large, growing market
We meet our clients’ needs in a large, growing market Client imperatives Market growth – 3-year CAGR Productivity Innovation Experience Security Source: IDC ICT Spending Guide July 2024, IDC Black Book November 2024, IDC Worldwide AI and Generative AI Spending Guide, 3-year CAGR 2025-2028 Growth Cos
Slide 52: Clients value our expertise to accelerate digital transformation
Clients value our expertise to accelerate their digital transformation 75% of consulting buyers expect AI to have a positive impact on their use of consulting >$4B Generative AI Signings, inception-to-date AI optimism abounds 70% of buyers say the use of AI in consulting will make them buy from fewe
Slide 53: Pivoting fast to meet future needs
Automation of a function Deliver standardized services through a platform We are pivoting fast to meet future needs as the market evolves People + AI Technology arbitrage Digitally transform core operating models with experts using assets Service as Software Yesterday Today Tomorrow→ → IBM Consultin
Slide 54: Services portfolio leverages deep expertise
Strategy & Technology - $11B to accelerate transformation Intelligent Operations - $9B to run more efficiently Run application workflows and business processes Manage application, data, and hybrid cloud workloads Integrate security solutions to de-risk and prevent threats Advise on strategy to drive
Slide 55: Accelerating AI expertise and outcomes
1 As of year end 2024 2 Democratizing Ansible Development for IBM CIO Using watsonx, IBM 2024 75K IBM Consultants earned GenAI certifications1 50+ AI client references1 Agents Applications Methods IBM Consulting Advantage is a first of its kind AI-powered delivery platform leveraging IBM and partner
Slide 56: Our track record demonstrates our success
Largest IBM Technology and Red Hat GSI IBM Consultants earned watsonx certifications 70K $16B Signings, inception (2019) through 4Q24 Strategic partnerships with leading technology platforms Key strategic partners each contributing $1B+ in annual revenue1 3 Growth through top clients and transformat
Slide 57: Taking action to increase profit margin
DeliveryValue Capture Align pricing with our unique value proposition and deep expertise Scale pricing models for digital labor and assets Enhance efficiency and quality with AI-powered assets and automation to deliver accelerated outcomes for our clients Productivity Invest in skills and certificat
Slide 58: Helping clients prepare for the future
We are helping clients prepare for the future “We’re on a mission to shape the future of air travel at Riyadh Air. Partnering with IBM has been a game changer in accelerating our success, leveraging their AI productivity in delivery, and together we’re pushing the boundaries of innovation to create
Slide 59: Consulting's role in IBM's flywheel for growth
Repositioned portfolio to align with IBM’s growth vectors of hybrid cloud and AI; >$4B GenAI book of business Leading the way with human + digital labor – a first of kind AI delivery platform leveraging IBM Technology Significant opportunity to grow penetration with strategic partners and use M&A to
Slide 60: Infrastructure
Infrastructure Ric Lewis Senior Vice President, Infrastructure
Slide 61: Powering the world's most critical workloads
IBM Z IBM Storage Infrastructure SupportIBM Power 70% 3 generations of continuous program-to- program growth of the world’s transactions by value run on IBM Z #1 in uptime for enterprise workloads on distributed compute architectures1 220K storage all-flash array systems deployed worldwide 4.5M inci
Slide 62: Returning to growth with margin expansion
Investment in Innovation ~30% increase in development investment in growth areas Revamp of Business Model ~3pts margin expansion through rigorous product management Optimization of the Value Chain $1B+ in productivity savings from transformation of go-to- market, supply chain and operations Transfor
Slide 63: Building on IBM Z momentum
Sustained Usage Growth ~3x installed capacity over the last decade Evolving IBM Z to meet client needs 250+ client identified AI use cases Program to program revenue growth *Cumulative revenue comparison over programs 2014 2019 2024 Installed MIPSStandard MIPS Specialty MIPS z13 z14 z15 z16 First 8
Slide 64: Growing Storage faster than the market
Execution Excellence Innovation for Growth Mainframe Storage – CyberVault and Safeguarded copies – End-to-end encryption – Compliance and regulation Software Investment Ecosystem Inventory/Supply Chain Optimization Value Capture Distributed and Tape – Computational storage – Real-time ransomware det
Slide 65: Capturing AI infrastructure opportunities
Enterprise AI Focus – Targeted verticals – Specific use cases – Integrated value proposition Capturing AI infrastructure opportunities 65
Slide 66: Helping our clients accelerate business outcomes
66 Optimized AI pipeline with IBM Storage Low-cost, high-performance data access with IBM software defined storage Exascale supercomputing and AI capabilities across Europe Fraud prevention with AI on IBM Z Score 100% of transactions on fraud (<3ms, runtime execution) Step change reduction in false
Slide 67: Infrastructure's role in IBM's flywheel for growth
Build on IBM Z momentum through innovation to capitalize on incumbent workloads and data gravity Continue to take share in IBM Storage, capturing data- driven opportunities Expand solutions to address new AI market opportunities Delivering trust and incumbency, driving the rest of the IBM portfolio
Slide 68: Quantum
Quantum Jay Gambetta Vice President, Quantum and IBM Fellow
Slide 69: Quantum computing potential value at tech maturity
“Quantum computing has the potential to create over $500B in value at tech maturity.” - BCG Source: BCG, “The Long-Term Forecast for Quantum Computing Still Looks Bright,” 2024 69
Slide 70: Our Quantum Strategy
Our Quantum Strategy Change client's business with quantum computing Quantum Industry, Technical and Consulting Services Create, apply, and integrate quantum capabilities into workflows Make Qiskit the de facto quantum software platform IBM Software Develop and enable quantum workflows across existi
Slide 71: IBM has the most performant quantum computers
IBM has the most performant quantum computers Superconducting vs Ions Speed 400x-2,000x faster @ 500 shots & 56 Qubits Cost 1,200x-70,000x cheaper @ 500 shots & 56 Qubits Key factors What really matters when comparing execution on various hardware? Scale: Can I run the job? Quality: Was the result c
Slide 72: IBM has deployed 75+ systems since 2016
IBM has deployed 75+ systems since 2016 Today, we have 13 utility-scale quantum computers (100+ qubits) operational in Poughkeepsie, NY; our European data center; and in client locations around the world 72
Slide 73: IBM has deployed more quantum systems than the rest of the world combined
IBM has deployed more quantum systems than the rest of the world combined and continues to provide the most access to systems Key factors What really matters when clients choose a system? Ease of Use: How to I get access to the system? Reliability: Is the system available round-the-clock? Performanc
Slide 74: Our development roadmap
Our development roadmap Hardware Innovation Software Innovation Researchers Quantum Physicist Data Scientist Run quantum circuits on the IBM Quantum Platform Release multi- dimensional roadmap publicly with initial aim focused on scaling Enhancing quantum execution speed by 100x with Qiskit Runtime
Slide 75: Qiskit is the most popular open-source quantum SDK
Qiskit is the most popular open-source quantum SDK Key factors What really matters when choosing a development platform? Ease of use: Is there comprehensive documentation? Stability: Is the code base stable and updated on a regular cadence? Performance: Can I run my workloads fast? Source: Unitary F
Slide 76: Qiskit is the most built-upon quantum platform
Qiskit is the most built- upon quantum platform Key factors What really matters when building upon a development platform? Ease of Use: Can I easily integrate the code base into my workflow? Extensibility: Can others use my workflow? Performance: Can my users run their workloads fast using my soluti
Slide 77: Largest and strongest ecosystem advancing quantum computing
IBM has the largest and strongest ecosystem advancing quantum computing Key factors What are the main benefits of being part of an ecosystem? Learning: Who can I partner with to accelerate development of needed skills? Collaboration: How do I collaborate with trusted leaders in quantum technology? B
Slide 78: IBM Quantum is approaching $1 billion of signings
IBM Quantum is approaching $1 billion of signings since inception1 2025 Demonstrate the quantum-centric data center with Qiskit + HPC 2026 Demonstrate quantum advantage 2027 Demonstrate a viable path to an error-corrected quantum computer 2028 Demonstrate the first error- corrected quantum computer
Slide 79: Financial Model
Financial Model James Kavanaugh Senior Vice President and Chief Financial Officer
Slide 80: Our long-term value creation framework
~1pt Operating PTI margin expansion per year Revenue Acceleration Growth through Software-led, integrated platforms Higher Profitability Mix, productivity, and scale driving FCF growth > revenue Financial Flexibility Fueling innovation and capital return to shareholders 5%+ Sustainable revenue growt
Slide 81: Integrated strategy drives our value creation framework
IBM’s integrated strategy drives our value creation framework Client Trust ~80% of IBM revenue from clients who purchase from all three segments Hybrid Cloud & AI Leadership 93% of all Fortune 500 companies use IBM’s hybrid cloud products and solutions >$5B GenAI bookings ITD Domain Expertise Top 10
Slide 82: Repositioned us for accelerating growth and higher profitability
Hybrid Cloud Red Hat revenue ~2x and built a $16B Consulting book of business since acquisition announcement Generative AI >$5B GenAI bookings across Software and Consulting Software-led portfolio Software ~45% of IBM revenue in 2024 Productivity and Operating Leverage $3.5B annualized savings achi
Slide 83: Driving consistent total shareholder return outperformance
Driving consistent total shareholder return outperformance Since Kyndryl Separation November 2021 Trailing 3-year Trailing 1-year Total shareholder return as of January 30, 2025 Source: CapIQ 83
Slide 84: Momentum across our business positions us for the future
Momentum across our business positions us for the future 1 IDC Black Book, November 2024, IDC; IDC AI and Generative AI Spending Guide, August 2024, IDC, Doc #US52520724 Note 3, 6, 9 84
Slide 85: 2025 guidance reflects the next evolution of our model
Our 2025 guidance reflects the next evolution of our model 2025E Revenue 5%+ PTI Margin >0.5pts Adj. EBITDA Double-digit growth Tax Rate Mid-teens Free Cash Flow ~$13.5B – Hybrid cloud platform accelerating – Continued AI leadership across portfolio – New IBM Z cycle driving full-stack growth – Soft
Slide 86: Revenue accelerators enable sustainable higher growth
Our revenue accelerators enable sustainable higher growth Note 3, 12, 13 86 Growth Accelerators Portfolio Mix Integrated Value Investment in Innovation
Slide 87: Better positioned in higher growth end markets
IBM is better positioned in higher growth end markets Higher growth revenue mix Transaction Processing Mid-single digits Software ~10% Hybrid Cloud Mid-teens Automation Low double digits Data Mid-to-high single digits Led by Software, approaching ~50% of the portfolio 20181 2024 Model Model 1 Data a
Slide 88: Integrated business drives a multiplier effect on growth
Our integrated business accelerates client value and drives a multiplier effect on growth Hybrid Cloud GenAI IBM Z The only company that builds, deploys and manages software for Hybrid Cloud Enterprise AI that aligns advanced technology with domain expertise Infrastructure for mission critical workl
Slide 89: Focused investment is driving long-term sustainable growth
Focused investment is driving long-term sustainable growth GenAI bookings, inception to date>$5B AI Solutions OpenShift ARR growth to $1.4B through 20242>13x Hybrid Cloud Growth in installed MIPS over the last decade, driving our stack multiplier3x Critical Infrastructure Quantum bookings, inception
Slide 90: M&A is a key enabler of our strategy
M&A ObjectivesM&A Principles M&A is a key enabler of our strategy Attractive financial profile, including FCF accretive in year 2 Drive compelling synergistic benefit across IBM Accelerate IBM’s Hybrid Cloud and AI strategy Drive 1-2 points of sustainable revenue growth annually Software ~75% of spe
Slide 91: Unique synergy and value creation potential
Unique synergy and value creation potential amplifies our strategy Increased emphasis on integration efficiency is accelerating synergy realization, reducing operational risk Note: Bars represent modeled M&A financial profile blend of Software and Consulting Assumes inorganic capital allocation of 7
Slide 92: Track record of creating value through M&A
Track record of creating value through M&A Acquired July 2019 Positions IBM as the leading hybrid cloud provider Growth in OpenShift revenue to ~$1.4B ARR in 20241 Growth in bookings since acquisition Growth in revenue, including synergies, since acquisition >13x 25%+ 4x 3x#128 Acquired August 2023
Slide 93: Continued runway for margin expansion
Continued runway for margin expansion Portfolio mix Software approaching ~50% Productivity Attractive ROI from innovation Scale and Efficiency G&A competitiveness 93 Delivered ~1pt per year Operating PTI Margin expansion from 2021 to 2024, well ahead of mid-term model Note 2, 10, 12
Slide 94: Multiple levers for sustained productivity and efficiency
Multiple levers for sustained productivity and efficiency 94 Productivity savings 2024 exit run rate Initial goal: $2B Achieved: Productivity savings 2024 exit run rate $3.5BEnhancing talent utilization Optimizing service delivery Streamlining our supply chain Creating value through procurement Auto
Slide 95: Free cash flow driven by durable higher revenue growth
Free cash flow driven by durable higher revenue growth Quality Driven by Adjusted EBITDA Growth 2-3 pts > revenue Realization Maintain >125% 95 FCF Margin 15% 18% 20% 21% Exited 2024 with our highest reported free cash flow margin in history Note 1, 5, 8, 12
Slide 96: Continued disciplined capital allocation
Continued disciplined capital allocation Our financial model provides ample flexibility Adjusted EBITDA growth unlocks incremental flexibility Post-dividend free cash flow grew 40%+ from 2022-2024 Strategic Investment Invest organically and through disciplined acquisitions to strengthen leadership i
Slide 97: IBM is committed to maximizing value for shareholders
IBM is committed to maximizing value for shareholders A radically different company Focused Hybrid Cloud and AI portfolio aligned to client needs + a culture of growth and performance Accelerating revenue growth to 5%+ Proven repositioning, on path to accelerate growth Delivering FCF growth > revenu
Slide 98: Appendix
Appendix
Slide 99: IBM's new reported revenue categories
IBM’s new reported revenue categories Segments 2024 Revenue 2024 Profit Margin Revenue categories Target growth Software $27B ~45% of total 32% Hybrid Cloud Automation Data Transaction Processing Mid-teens Low double digits Mid-to-high single digits Mid-single digits Consulting $21B ~33% of total 10
Slide 100: Notes
Notes 100 Note 1 Free cash flow is a non-GAAP measure. For additional information, please refer to slide 4. Note 2 Pre-tax income margin is operating and a non-GAAP measure. For additional information, please refer to slide 4. Note 3 2-year and 3-year CAGR are at constant currency and are non-GAAP m
Slide 101: Reconciliation of 2-year revenue CAGR
Non-GAAP reconciliation Reconciliation of 2-year revenue CAGR 101 2-year compound average revenue growth rate 2018-2020* GAAP @CC Total Revenue (4%) (3%) 2-year compound average revenue growth rate 2022-2024 GAAP @CC Total Revenue 2% 3% Consulting 2% 3% Infrastructure (4%) (3%) *Reported revenue in
Slide 102: Reconciliation of Software Rule of 40
102 Non-GAAP reconciliation Reconciliation of Software "Rule of 40" Software "Rule of 40" GAAP Revenue growth YtY + Segment profit margin Revenue growth YtY @CC + Segment profit margin FY 2024 40% 41% The above reconciles the non-GAAP financial information contained in the "Software" discussion in t
Slide 103: Reconciliation of Software reported revenue categories modeled growth
103 Non-GAAP reconciliation Reconciliation of Software reported revenue categories modeled growth - FY 2024 FY24 Yr/Yr* GAAP @CC Hybrid Cloud 11% 12% Automation 9% 10% Data 3% 4% Transaction Processing 9% 10% *Estimated using reported revenue categories effective January 1, 2025 The above reconciles
Slide 104: Reconciliation of 3-year revenue CAGR
104 Non-GAAP reconciliation Reconciliation of 3-year revenue CAGR 3-year compound average revenue growth rate 2021-2024 GAAP @CC Infrastructure (0%) 2% The above reconciles the non-GAAP financial information contained in the "Infrastructure" and "Financial Model" discussion in the IBM Investor Day m
Slide 105: Reconciliation of free cash flow margin
105 Non-GAAP reconciliation Reconciliation of free cash flow margin - FY 2020 & FY 2022-FY 2024 Operating cash flow as a % of GAAP revenue Free cash flow as a % of GAAP revenue 2020 25% 15% 2022 17% 15% 2023 23% 18% 2024 21% 20% The above reconciles the non-GAAP financial information contained in th
Slide 106: Reconciliation of post-dividend free cash flow growth
106 Non-GAAP reconciliation Reconciliation of post-dividend free cash flow growth - FY 2022- FY 2024 FY 2024 FY 2023 FY 2022 Free cash flow* 12.7 11.2 9.3 Less: cash dividends paid 6.1 6.0 5.9 Free cash flow post dividend 6.6 5.2 3.4 Average annual post dividend growth YtY - 2022-2024** 40%+ * Cash
Slide 107: Copyright and trademarks
107 © Copyright IBM Corporation 2025 IBM and the IBM logo are trademarks of IBM Corporation, registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on ibm.com/trademark. Adobe and the Ad
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