IBM closed out the year with a stronger-than-expected fourth quarter, reinforcing the company’s narrative that its long-running reinvention around software, artificial intelligence, and hybrid cloud is gaining traction, even as growth moderates from last year’s pace.
The technology giant reported adjusted earnings per share of $4.52 for the quarter, ahead of analysts’ expectations of $4.32, while revenue came in at $19.69 billion, topping the $19.23 billion forecast compiled by LSEG. Revenue rose 12% from $17.6 billion a year earlier, while net income nearly doubled to $5.6 billion, or $5.88 per share, compared with $2.92 billion, or $3.09 per share, in the same period last year.
For the full year ahead, IBM said it expects revenue growth to exceed 5%, a slowdown from the roughly 8% expansion recorded last year but still slightly ahead of Wall Street’s expectations. Analysts are forecasting sales growth of about 4.6% in 2026, according to LSEG. The company also guided for an additional $1 billion increase in free cash flow after generating $14.7 billion in 2025, underlining management’s focus on cash generation alongside growth.
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Chief Executive Arvind Krishna framed the results as validation of IBM’s strategic shift. In a statement, he said the company’s generative artificial intelligence book of business has now surpassed $12.5 billion, a figure that reflects both consulting contracts and software tied to AI deployments.
“This capped a strong 2025 for IBM where we exceeded expectations for revenue, profit and free cash flow,” Krishna said.
IBM’s results highlight how the company has carved out a different AI narrative from many of its Big Tech peers. Rather than building massive consumer-facing models, IBM has focused on enterprise use cases, embedding AI into automation tools, data platforms, and hybrid cloud infrastructure. That approach was evident in the quarter’s segment performance.
Software revenue rose 14% to $9 billion, driven by demand for automation products, data and analytics tools, and Red Hat, the open-source software business that has become central to IBM’s hybrid cloud strategy. Red Hat, in particular, remains a key pillar as enterprises look to run workloads across on-premise systems and multiple cloud providers without being locked into a single platform.
Infrastructure revenue jumped 21% to $5.1 billion, helped by a sharp rebound in demand for IBM’s Z Systems mainframe computers. Sales in that line surged 67% year over year, reflecting a new product cycle and continued reliance by large enterprises, banks, and governments on mainframes for mission-critical workloads. The strength of the infrastructure business also underscores how IBM has managed to keep legacy technologies relevant by tying them more closely to modern software and AI capabilities.
Krishna also used the earnings call to reiterate IBM’s ambitions in quantum computing, saying the company is on track to deliver its first large-scale quantum computer by 2029. While still years away from broad commercial use, quantum computing is an area where IBM has long sought to establish technical leadership, and the timeline offers investors a clearer sense of how it fits into the company’s longer-term roadmap.
The results arrive at a time when investors are increasingly selective about AI exposure. After a surge of spending across the tech sector, markets have begun to scrutinize which companies can translate AI enthusiasm into durable revenue and cash flow. IBM’s emphasis on enterprise contracts, recurring software revenue, and free cash flow growth appears to be resonating, even if its growth rates trail those of faster-moving cloud-native rivals.
The company also returned cash to shareholders. IBM’s board approved a quarterly dividend of $1.68 per share, payable on March 10, extending its long-standing record of dividend payments and reinforcing its appeal to income-focused investors.
Overall, the quarter paints a picture of a company that has stabilized after years of restructuring and portfolio shifts. Growth is no longer accelerating, and management has been careful to temper expectations for the year ahead. But with AI bookings climbing, mainframes enjoying a cyclical rebound, and cash flow continuing to improve, IBM appears as a steadier, enterprise-focused beneficiary of the AI wave rather than a speculative one.