International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2025 Earnings Presentation
33 slides from International Business Machines's earnings presentation, Apr 23, 2025
Slide 1: 1Q 2025 Earnings
1Q 2025 Earnings April 23, 2025 ibm.com/investor
Slide 2: 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 adjusted EBITDA and adjustments for currency. The rationale for management’s looking under the Private Securities Litigation Reform Act of 1995. Forward- use of this non-GAA
Slide 3: Arvind Krishna and James Kavanaugh
Arvind Krishna James Kavanaugh Chairman, President and SVP, Finance & Operations Chief Executive Officer and Chief Financial Officer 3
Slide 4: CEO perspective
CEO perspective “We exceeded expectations for revenue, profitability and free cash flow in the quarter, led by strength across our Software portfolio. There continues to be strong demand for generative AI and our book of business stands at more than $6 billion inception-to-date, up more than $1 bill
Slide 5: Financial highlights
Financial highlights 1Q25 2% 9% $14.5B $2.0B Revenue growth yr/yr Software revenue growth yr/yr Revenue Free cash flow 190bps ~240bps Gross margin expansion Adjusted EBITDA margin (operating) expansion “Revenue growth, once again led by Software, combined with our productivity initiatives, drove sig
Slide 6: Software
Software $6.3B +9% Revenue Revenue growth Growth of 9% including ~6 points of organic contribution Red Hat high-teens annual bookings growth and Revenue categories-1Q25 6-month revenue under contract up mid-teens Automation Hybrid Cloud Solid recurring revenue base; ARR of $21.7 billion, +15% yr/yr
Slide 7: Consulting
Consulting $5.1B Flat Revenue Revenue growth Continued growth in generative AI bookings Solid backlog performance Revenue categories-1Q25 Client reprioritization and spend constraints continued to impact yield Strategy and Intelligent Technology Operations (1%) yr/yr Flat yr/yr Strong profit margin
Slide 8: Infrastructure
Infrastructure $2.9B (4%) Revenue Revenue growth Infrastructure performance reflects product cycle dynamics Revenue categories-1Q25 Broad-based growth across the storage portfolio Announced IBM z17 with multi-model AI Infrastructure Hybrid capabilities, new security features, and tools for Support I
Slide 9: Summary
Summary 1Q25 Summary 2025 Expectations Exceeded our expectations across revenue, Based on what we know today, maintaining our profitability, and cash flow full-year guidance Generative AI book of business greater than Revenue growth @CC inflecting higher to 5%+ $6 billion inception-to-date Operating
Slide 10: ibm.com/investor
ibm.com/investor
Slide 11: Supplemental material
Supplemental material Revenue and P&L highlights Adjusted EBITDA performance Cash flow and balance sheet highlights Currency impact on revenue growth Software & Infrastructure segment details Consulting segment details Expense summary Balance sheet summary Free cash flow summary Cash flow (ASC 230)
Slide 12: Revenue and P&L highlights
Revenue and P&L highlights Revenue highlights 1Q25 B/(W) Operating P&L highlights $ 1Q25 B/(W) Yr/Yr Yr/Yr Revenue $14.5 2% Gross profit $8.2 4% Expense $6.5 (4%) Americas $7.2 Flat Pre-tax income $1.7 5% Europe/ME/Africa $4.6 8% Net income $1.5 (3%) Asia Pacific $2.8 Flat Earnings per share $1.60 (
Slide 13: Adjusted EBITDA performance
Adjusted EBITDA performance 1Q25 Yr/Yr Operating (non-GAAP) pre-tax income from continuing operations $1.7 $0.1 Net interest expense $0.3 $0.0 Depreciation/Amortization of non-acquired intangible assets $0.7 ($0.0) Stock-based compensation $0.4 $0.1 Workforce rebalancing charges $0.3 ($0.1) Corporat
Slide 14: Cash flow and balance sheet highlights
Cash flow and balance sheet highlights Cash flow 1Q25 Yr/Yr Balance sheet Mar 25 Dec 24 Mar 24 Net cash from operations* $2.3 $0.0 Cash & marketable securities $17.6 $14.8 $19.3 Free cash flow** $2.0 $0.1 Total debt $63.3 $55.0 $59.5 Select uses of cash 1Q25 Yr/Yr Select debt measures Mar 25 Dec 24
Slide 15: Currency impact on revenue growth
Currency impact on revenue growth Quarterly averages per US $ 1Q25 Yr/Yr Spot @2Q 2Q25 3Q25 4Q25 FY25 Earnings Euro 0.95 (3%) 0.87 6% 4% 7% 4% Pound 0.79 (1%) 0.75 5% 3% 4% 3% Yen 152 (3%) 141 9% 6% 8% 5% Revenue impact, future @2Q Earnings Spot (1.8 pts) 2-2.5 pts ~1.5 pts ~3 pts 1-1.5 pts Revenue
Slide 16: Software & Infrastructure segment details
Software & Infrastructure segment details Software segment 1Q25 B/(W) Infrastructure segment 1Q25 B/(W) Yr/Yr Yr/Yr Revenue $6.3 9% Revenue $2.9 (4%) Hybrid Cloud $1.7 13% Hybrid Infrastructure $1.6 (7%) Automation $1.6 15% IBM Z (14%) Data $1.2 7% Distributed Infrastructure (4%) Transaction Process
Slide 17: Consulting segment details
Consulting segment details Consulting segment 1Q25 B/(W) Yr/Yr Revenue $5.1 Flat Strategy and Technology $2.8 (1%) Intelligent Operations $2.3 Flat Gross profit margin 27.3% 1.9 pts Segment profit $0.6 32% Segment profit margin 11.0% 2.8 pts Signings $4.9 (9%) Book-to-bill ratio (TTM) >1.15 Revenue
Slide 18: Expense summary
Expense summary Expense 1Q25 B/(W) Acq/ Yr/Yr Currency Divest** Base*** Operating expense & other income* $6.5 (4%) 1 pts (6 pts) 1 pts SG&A – operating $4.5 4% 1 pts (2 pts) 5 pts R&D – operating $1.9 (8%) 1 pts (3 pts) (7 pts) IP and custom development income ($0.3) 17% Other (income)/expense - op
Slide 19: Balance sheet summary
Balance sheet summary Mar 25 Dec 24 Mar 24 Cash & marketable securities $17.6 $14.8 $19.3 Core (non-IBM Financing) assets* $116.8 $108.9 $106.4 IBM Financing assets $11.3 $13.5 $11.5 Total assets $145.7 $137.2 $137.2 Other liabilities $55.4 $54.8 $54.3 Core (non-IBM Financing) debt* $53.3 $42.9 $49.
Slide 20: Free cash flow summary
Free cash flow summary B/(W) 1Q25 Yr/Yr Net cash from operations $4.4 $0.2 Less: IBM Financing receivables $2.1 $0.2 Net cash from operations (excluding IBM Financing receivables) $2.3 $0.0 Net capital expenditures ($0.3) $0.0 Free cash flow (excluding IBM Financing receivables) $2.0 $0.1 $ in billi
Slide 21: Cash flow (ASC230)
Cash flow (ASC230) 1Q25 1Q24 Net income from operations $1.1 $1.6 Depreciation / amortization of intangibles* $1.2 $1.1 Stock-based compensation $0.4 $0.3 Operating assets and liabilities / other, net ($0.4) ($0.8) IBM Financing A/R $2.1 $1.9 Net cash provided by operating activities $4.4 $4.2 Capit
Slide 22: Software segment categories
Software segment categories Revenue categories Revenue categories – FY 2024 The Software portfolio delivers end-to-end enterprise capabilities for Hybrid Cloud and AI: Hybrid Cloud incl. RHEL, OpenShift, Ansible, Red Hat AI Automation Automation Hybrid Cloud incl. application development & integrati
Slide 23: Consulting segment categories
Consulting segment categories Revenue categories Revenue categories – FY 2024 Strategy and Technology Provides strategy, process design, system implementation, cloud architecture and implementation services to help clients transform their businesses for growth and enable innovation. These services e
Slide 24: Infrastructure segment categories
Infrastructure segment categories Revenue categories Revenue categories – FY 2024 Hybrid Infrastructure Hybrid Innovative infrastructure platforms to help meet the new requirements Infrastructure of hybrid multi-cloud and enterprise AI workloads leveraging flexible and as-a-service consumption model
Slide 25: Non-GAAP supplemental materials: revenue performance
Non-GAAP supplemental materials Reconciliation of revenue performance – 1Q 2025 1Q25 Yr/Yr GAAP @CC Total revenue 1% 2% Americas (1%) Flat Europe/ME/Africa 6% 8% Asia Pacific (2%) Flat The above reconciles the non-GAAP financial information contained in the “Financial highlights”, “Revenue and P&L h
Slide 26: Non-GAAP supplemental materials: segment revenue performance
Non-GAAP supplemental materials Reconciliation of segment revenue performance – 1Q 2025 1Q25 Yr/Yr 1Q25 Yr/Yr GAAP @CC GAAP @CC Software 7% 9% Consulting (2%) Flat Hybrid Cloud 12% 13% Strategy and Technology (3%) (1%) Automation 14% 15% Intelligent Operations (2%) Flat Data 5% 7% Transaction Proces
Slide 27: Non-GAAP supplemental materials: expense summary
Non-GAAP supplemental materials Reconciliation of expense summary – 1Q 2025 1Q25 Non-GAAP Operating GAAP adjustments (non-GAAP) SG&A Currency 1 pts 0 pts 1 pts Acquisitions/divestitures (2 pts) 0 pts (2 pts) Base* 3 pts 2 pts 5 pts R&D Currency 1 pts 0 pts 1 pts Acquisitions/divestitures (3 pts) 0 p
Slide 28: Non-GAAP supplemental materials: continuing operations
Non-GAAP supplemental materials Reconciliation of continuing operations – 1Q 2025 1Q25 Acquisition- Retirement- related related Tax reform Operating GAAP adjustments adjustments impacts (non-GAAP) Gross profit $8,031 $201 — — $8,232 Gross profit margin 55% 1.4 pts — — 57% SG&A 4,886 (353) — — 4,533
Slide 29: Non-GAAP supplemental materials: net income to adjusted EBITDA
Non-GAAP supplemental materials Reconciliation of GAAP net income to adjusted EBITDA 1Q25 Yr/Yr Net income as reported (GAAP) $1.1 ($0.5) Less: income/(loss) from discontinued operations, net of tax $0.0 ($0.0) Income from continuing operations $1.1 ($0.5) Provision for/(Benefit from) income taxes f
Slide 30: Non-GAAP supplemental materials: net cash to adjusted EBITDA
Non-GAAP supplemental materials Reconciliation of net cash from operations to adjusted EBITDA 1Q25 1Q24 Net cash provided by operating activities $4.4 $4.2 Add: Net interest expense $0.3 $0.2 Provision for/(Benefit from) income taxes from continuing operations $0.1 ($0.5) Less change in: Financing r
Slide 31: Non-GAAP supplemental materials: pre-tax income margin
Non-GAAP supplemental materials Reconciliation of Pre-tax income margin – 1Q 2025 Pre-tax margin yr/yr B/(W) GAAP 0.5 pts Non-operating adjustments* 0.0 pts Operating (non-GAAP) 0.5 pts Adjusted to exclude workforce rebalancing and divesture dynamics** (1.3) pts Operating (non-GAAP) excl. impacts of
Slide 32: Non-GAAP supplemental materials: FY 2025 expectations
Non-GAAP supplemental materials Reconciliation of Pre-tax income margin – FY 2025 expectations Operating GAAP (non-GAAP) FY 2025 >5 pts* >0.5 pts *Incudes the impact of one-time, non-cash, U.S. and non-U.S. pension settlement charges in 2024 The above reconciles the non-GAAP financial information co
Slide 33: ibm.com/investor
ibm.com/investor
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