filings.toolsItem 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED MARCH 31, 2025
Snapshot
Organization of Information:
In the first quarter of 2025, we made changes to the reported revenue categories within our Software and Consulting reportable segments. These changes did not impact our Consolidated Financial Statements or our reportable segments. The revenue categories are reported on a comparable basis for all periods. Refer to note 3, “Revenue Recognition,” for additional information.
Within the tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts. Certain prior-period amounts have been reclassified to conform to the current-period presentation. This is annotated where applicable.
Currency:
The references to “adjusted for currency” or “at constant currency” in the Management Discussion do not include operational impacts that could result from fluctuations in foreign currency rates. When we refer to growth rates at constant currency or adjust such growth rates for currency, it is done so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of business performance. Financial results adjusted for currency are calculated by translating current period activity in local currency using the comparable prior-year period’s currency conversion rate. This approach is used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates. Refer to “Currency Rate Fluctuations” for additional information.
Operating (non-GAAP) Earnings:
In an effort to provide better transparency into the operational results of the business, supplementally, management separates business results into operating and non-operating categories. Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges and intangible asset amortization, expense resulting from basis differences on equity method investments, retirement-related costs and their related tax impacts. Due to the unique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (U.S. tax reform), management characterizes the one-time provisional charge recorded in the fourth quarter of 2017 and adjustments to that charge as non-operating. Adjustments primarily include true-ups, accounting elections and any changes to regulations, laws or audit adjustments that affect the recorded one-time charge. For acquisitions, operating (non-GAAP) earnings exclude the amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges, such as financing costs. These charges are excluded as they may be inconsistent in amount and timing from period to period and are significantly impacted by the size, type and frequency of our acquisitions. Management also characterized as non-operating expense, given its unique and temporary nature, the mark-to-market impact on the foreign exchange derivative contracts entered into prior to the acquisition of StreamSets and webMethods from Software AG, beginning in December 2023, to economically hedge the foreign currency exposure related to the purchase price of this acquisition. These derivative contracts expired by June 28, 2024. This impact was recorded in other (income) and expense in the Consolidated Income Statement and reflected the changes in fair value of these derivative contracts. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, management characterizes certain items as operating and others as non-operating, consistent with GAAP. We include defined benefit plan and nonpension postretirement benefit plan service costs, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related costs include defined benefit plan and nonpension postretirement benefit plan amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. Non-operating retirement-related costs are primarily related to changes in pension
Management Discussion – (continued)
plan assets and liabilities which are tied to financial market performance, and we consider these costs to be outside of the operational performance of the business.
Overall, management believes that supplementally providing investors with a view of operating earnings as described above provides increased transparency and clarity into both the operational results of the business and the performance of our pension plans; improves visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows us to provide a long-term strategic view of the business going forward. In addition, these non-GAAP measures provide a perspective consistent with areas of interest we routinely receive from investors and analysts.
Financial Results Summary — Three Months Ended March 31
| (Dollars and shares in millions except per share amounts) | Yr.-to-Yr. Percent/ Margin Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Revenue (1) | $ | 14,541 | $ | 14,462 | 0.6 | % | ||||||||||||||
| Gross profit margin | 55.2 | % | 53.5 | % | 1.7 | pts. | ||||||||||||||
| Total expense and other (income) | $ | 6,873 | $ | 6,669 | 3.1 | % | ||||||||||||||
| Income from continuing operations before income taxes | $ | 1,158 | $ | 1,074 | 7.9 | % | ||||||||||||||
| Provision for/(benefit from) income taxes from continuing operations (2) | $ | 103 | $ | (502) | nm | |||||||||||||||
| Income from continuing operations | $ | 1,054 | $ | 1,575 | (33.1) | % | ||||||||||||||
| Income from continuing operations margin | 7.3 | % | 10.9 | % | (3.6) | pts. | ||||||||||||||
| Income from discontinued operations, net of tax | $ | 1 | $ | 30 | (98.1) | % | ||||||||||||||
| Net income | $ | 1,055 | $ | 1,605 | (34.3) | % | ||||||||||||||
| Earnings per share from continuing operations - assuming dilution | $ | 1.12 | $ | 1.69 | (33.7) | % | ||||||||||||||
| Consolidated earnings per share - assuming dilution | $ | 1.12 | $ | 1.72 | (34.9) | % | ||||||||||||||
| Weighted-average shares outstanding - assuming dilution | 945.4 | 933.4 | 1.3 | % | ||||||||||||||||
| At 3/31/2025 | At 12/31/2024 | |||||||||||||||||||
| Assets | $ | 145,667 | $ | 137,175 | 6.2 | % | ||||||||||||||
| Liabilities | $ | 118,714 | $ | 109,783 | 8.1 | % | ||||||||||||||
| Equity | $ | 26,953 | $ | 27,393 | (1.6) | % |
(1)Year-to-year revenue growth of 2.3 percent adjusted for currency.
(2)2024 benefit from income taxes due to the resolution of certain tax audit matters.
nm - not meaningful
Management Discussion – (continued)
The following table provides the company’s operating (non-GAAP) earnings for the first quarter of 2025 and 2024.
| (Dollars in millions except per share amounts) | Yr.-to-Yr. Percent Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Net income as reported | $ | 1,055 | $ | 1,605 | (34.3) | % | ||||||||||||||
| Income from discontinued operations, net of tax | 1 | 30 | (98.1) | |||||||||||||||||
| Income from continuing operations | $ | 1,054 | $ | 1,575 | (33.1) | % | ||||||||||||||
| Non-operating adjustments (net of tax): | ||||||||||||||||||||
| Acquisition-related charges | $ | 429 | $ | 346 | 24.2 | % | ||||||||||||||
| Non-operating retirement-related costs/(income) | 35 | 91 | (61.8) | |||||||||||||||||
| U.S. tax reform impacts | (2) | (448) | (99.6) | |||||||||||||||||
| Operating (non-GAAP) earnings (1) | $ | 1,517 | $ | 1,564 | (3.0) | % | ||||||||||||||
| Diluted operating (non-GAAP) earnings per share (1) | $ | 1.60 | $ | 1.68 | (4.8) | % |
(1)Refer to page 62 for a more detailed reconciliation of net income to operating earnings.
Macroeconomic Environment:
Our diversified business portfolio underpinned by Software, Consulting and Infrastructure creates value and drives growth. The economic uncertainties driven by the volatile trade environment have created disruptions in markets and complexities in supply chains. We have a long track record of operating globally and managing supply chain complexities. While no one is immune to uncertainty, we enter this period from a position of relative strength and resiliency having focused on accelerating our productivity initiatives and maintaining our strong balance sheet. These actions, combined with our diversification across geographies, industries and large enterprise clients position us well to navigate the current environment. In addition, the value of technology becomes even more critical during times of uncertainty because it allows businesses to maintain their competitive advantage by driving cost efficiencies and productivity, protecting their financial position, and fueling growth.
In the first three months of 2025, movements in global currencies continued to impact our reported year-to-year revenue and profit. We execute hedging programs which defer, but do not eliminate, the impact of currency. The (gains)/losses from these hedging programs are reflected primarily in other (income) and expense. Refer to “Currency Rate Fluctuations,” for additional information.
Financial Performance Summary — Three Months Ended March 31:
In the first quarter of 2025, we reported $14.5 billion in revenue, income from continuing operations of $1.1 billion, and operating (non-GAAP) earnings of $1.5 billion. Diluted earnings per share from continuing operations was $1.12 as reported and $1.60 on an operating (non-GAAP) basis. We generated $4.4 billion in cash from operations and $2.0 billion in free cash flow. We invested $7.1 billion in acquisitions, driven primarily by the closing of the HashiCorp acquisition and delivered shareholder returns of $1.5 billion in dividends. Our first-quarter performance reflects the continued success of our hybrid cloud and AI strategy. With our focus on the fundamentals of our business, we continue to maintain a strong liquidity position and solid cash flow generation which enables us to invest in our business and return value to shareholders through dividends.
Total revenue grew 0.6 percent as reported and 2 percent adjusted for currency compared to the prior-year period, led by Software. Software delivered revenue growth of 7.4 percent as reported and 9.0 percent adjusted for currency, with growth across all lines of business, reflecting demand for our focused portfolio that provides end-to-end hybrid cloud and AI capabilities. Consulting revenue decreased 2.3 percent as reported but was flat adjusted for currency, driven primarily by revenue declines in Strategy and Technology. Infrastructure revenue decreased 6.2 percent year to year as reported and 4.3 percent adjusted for currency, reflecting product cycle dynamics.
From a geographic perspective, Americas revenue decreased 1.2 percent as reported but was flat adjusted for currency. Europe/Middle East/Africa (EMEA) increased 5.6 percent as reported (7.7 percent adjusted for currency). Asia Pacific decreased 2.4 percent as reported but was flat adjusted for currency.
Management Discussion – (continued)
Gross margin of 55.2 percent increased 1.7 points year to year with margin expansion driven primarily by ongoing productivity initiatives and operating leverage. Operating (non-GAAP) gross margin of 56.6 percent increased 1.9 points compared to the prior-year period due to the same dynamics.
Total expense and other (income) increased 3.1 percent in the first quarter of 2025 compared to the first quarter of 2024 primarily driven by the prior-year gain on the divestiture of The Weather Company assets, higher current year spending, including expenses of acquired businesses, continued investments in portfolio innovation to drive our strategy, and higher acquisition-related charges and amortization of acquired intangible assets. These increases were partially offset by the benefits from productivity and the actions taken to transform our operations, the effects of currency, lower non-operating retirement-related cost and lower workforce rebalancing charges. Total operating (non-GAAP) expense and other (income) increased 3.8 percent year to year, driven primarily by the factors described above, excluding the impacts from non-operating retirement-related costs, acquisition-related charges and amortization of acquired intangible assets.
Pre-tax income from continuing operations of $1.2 billion increased 7.9 percent and pre-tax margin was 8.0 percent, an increase of 0.5 points compared to the first quarter of 2024. Performance this quarter benefited from our gross margin expansion and productivity actions taken to transform our enterprise operations; partially offset by our continued investments to drive innovation. Our year-to-year pre-tax income results were impacted by the gain from the divestiture of The Weather Company assets in the prior-year period, and lower workforce rebalancing charges in the current year, with a combined impact of $0.2 billion. The year-to-year divestiture dynamics and workforce rebalancing charges were a net hurt to our pre-tax income from continuing operations of approximately 14.6 points and pre-tax margin of approximately 1.3 points. The continuing operations provision for income taxes in the first quarter of 2025 was $0.1 billion, compared to a benefit from income taxes of $0.5 billion in the first quarter of 2024. The prior-year tax benefit was primarily driven by the resolution of certain tax audit matters. Net income from continuing operations of $1.1 billion decreased 33.1 percent and the net income from continuing operations margin was 7.3 percent, down 3.6 points year to year.
Operating (non-GAAP) pre-tax income from continuing operations of $1.7 billion increased 4.9 percent compared to the first quarter of 2024 and the operating (non-GAAP) pre-tax margin from continuing operations increased 0.5 points to 12.0 percent primarily driven by our gross margin performance and the benefits from productivity; partially offset by continued investments in innovation. The operating (non-GAAP) provision for income taxes in the first quarter of 2025 was $0.2 billion, compared to $0.1 billion in the first quarter of 2024. Operating (non-GAAP) net income from continuing operations of $1.5 billion decreased 3.0 percent and the operating (non-GAAP) net income margin from continuing operations of 10.4 percent decreased 0.4 points year to year.
Diluted earnings per share from continuing operations of $1.12 in the first quarter of 2025 decreased 33.7 percent compared to the prior-year period, and operating (non-GAAP) diluted earnings per share of $1.60 decreased 4.8 percent compared to the first quarter of 2024.
At March 31, 2025, the balance sheet remained strong with financial flexibility to support and invest in the business. Cash and cash equivalents, restricted cash and marketable securities at March 31, 2025 of $17.6 billion increased $2.8 billion from December 31, 2024 and debt of $63.3 billion at March 31, 2025 increased $8.3 billion, primarily driven by the first-quarter 2025 debt issuances.
Total assets increased $8.5 billion ($7.2 billion adjusted for currency) from December 31, 2024 primarily driven by an increase in goodwill and intangible assets mainly related to the HashiCorp acquisition. Total liabilities increased $8.9 billion ($7.3 billion adjusted for currency) from December 31, 2024 primarily driven by an increase in debt and deferred income; partially offset by decreases in tax liabilities and accounts payable. Total equity of $27.0 billion decreased $0.4 billion from December 31, 2024 primarily driven by dividends paid; partially offset by first-quarter 2025 net income.
Cash provided by operating activities was $4.4 billion in the first quarter of 2025, an increase of $0.2 billion compared to the first quarter of 2024 and free cash flow was $2.0 billion, an increase of $0.1 billion versus the prior-year period. Refer to page 59 for additional information on free cash flow. Net cash used in investing activities of $13.0 billion increased $8.8 billion compared to the prior-year period primarily driven by cash used for the HashiCorp acquisition. Financing activities were a net source of cash of $5.4 billion in the first three months of 2025 and increased $3.6 billion compared to the prior-year period primarily driven by higher net debt issuances in the current-year period.
Management Discussion – (continued)
First Quarter in Review
Results of Continuing Operations
Segment Details
As discussed in the “Organization of Information” section, in the first quarter of 2025, we made changes to the reported revenue categories within our Software and Consulting reportable segments. IBM's Software segment reports revenue and year-to-year revenue percent change for Hybrid Cloud (Red Hat), Automation, Data, and Transaction Processing. The Software segment no longer reports Hybrid Platform & Solutions or Security revenue categories. IBM's Consulting segment reports revenue and year-to-year revenue percent change for Strategy and Technology and Intelligent Operations. These changes did not impact our Consolidated Financial Statements or our reportable segments.
The following tables present each reportable segment’s revenue and gross margin results, followed by an analysis of the first three months of 2025 versus the first three months of 2024 reportable segments results. The reported revenue categories within our Software and Consulting reportable segments are reported on a comparable basis for all periods.
| (Dollars in millions) | Yr.-to-Yr. Percent/Margin Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Software | $ | 6,336 | $ | 5,899 | 7.4 | % | 9.0 | % | ||||||||||||||||||
| Gross margin | 83.6 | % | 82.4 | % | 1.2 | pts. | ||||||||||||||||||||
| Consulting | 5,068 | 5,186 | (2.3) | % | (0.5) | % | ||||||||||||||||||||
| Gross margin | 27.3 | % | 25.3 | % | 1.9 | pts. | ||||||||||||||||||||
| Infrastructure | 2,886 | 3,076 | (6.2) | % | (4.3) | % | ||||||||||||||||||||
| Gross margin | 52.8 | % | 54.2 | % | (1.4) | pts. | ||||||||||||||||||||
| Financing | 191 | 193 | (0.8) | % | 2.2 | % | ||||||||||||||||||||
| Gross margin | 45.8 | % | 48.5 | % | (2.6) | pts. | ||||||||||||||||||||
| Other | 61 | 108 | (43.6) | % | (42.0) | % | ||||||||||||||||||||
| Gross margin | (416.6) | % | (176.7) | % | (239.9) | pts. | ||||||||||||||||||||
| Total revenue | $ | 14,541 | $ | 14,462 | 0.6 | % | 2.3 | % | ||||||||||||||||||
| Total gross profit | $ | 8,031 | $ | 7,742 | 3.7 | % | ||||||||||||||||||||
| Total gross margin | 55.2 | % | 53.5 | % | 1.7 | pts. | ||||||||||||||||||||
| Non-operating adjustments: | ||||||||||||||||||||||||||
| Amortization of acquired intangible assets | 200 | 170 | 17.6 | % | ||||||||||||||||||||||
| Operating (non-GAAP) gross profit | $ | 8,232 | $ | 7,913 | 4.0 | % | ||||||||||||||||||||
| Operating (non-GAAP) gross margin | 56.6 | % | 54.7 | % | 1.9 | pts. |
Management Discussion – (continued)
Software
| (Dollars in millions) | Yr.-to-Yr. Percent Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 (1) | ||||||||||||||||||||||||
| Software revenue: | $ | 6,336 | $ | 5,899 | 7.4 | % | 9.0 | % | ||||||||||||||||||
| Hybrid Cloud | $ | 1,687 | $ | 1,510 | 11.7 | % | 13.4 | % | ||||||||||||||||||
| Automation | 1,584 | 1,391 | 13.8 | 15.3 | ||||||||||||||||||||||
| Data | 1,236 | 1,173 | 5.4 | 6.9 | ||||||||||||||||||||||
| Transaction Processing | 1,828 | 1,824 | 0.2 | 1.9 |
(1)Recast to reflect January 2025 changes to the reported revenue categories.
Software revenue of $6,336 million increased 7.4 percent as reported (9.0 percent adjusted for currency) in the first quarter of 2025 compared to the prior-year period, with growth in all lines of business. This performance reflects the demand for our focused portfolio that provides end-to-end hybrid cloud and AI capabilities. Our organic Software revenue contributed approximately 4 points of growth as reported (6 points adjusted for currency) with continued demand for our generative AI products including our AI assistants and agents and watsonx platform. This revenue performance continued to reflect growth in our high-value, recurring revenue base, which represents approximately 80 percent of our annual software revenue.
Revenue performance by line of business in the first quarter compared to the prior-year period was as follows:
Hybrid Cloud's (Red Hat) double-digit growth reflects strong growth in subscriptions and moderate growth in consumption-based services. OpenShift and Ansible gained market share, and along with RHEL each had double-digit growth. Automation grew revenue including contribution from our automation suite of products as clients proactively address cost, performance and resiliency within complex hybrid cloud native architectures. Data revenue grew as customers continue to prepare their data for generative AI, with rising demand for AI assistants and agents, increasing demand for our watsonx platform, and the need for data security. The revenue performance in Transaction Processing was driven by its solid base of recurring revenue and growth from our generative AI offerings for transaction processing. Clients remain committed to these products, underscoring the strategic importance of this mission-critical software.
Across Software, our annual recurring revenue (ARR) was $21.7 billion, which increased 9.2 percent as reported (10.9 percent adjusted for currency). In the first quarter of 2025, the ARR calculation was updated to include all recurring revenue within the Software segment. ARR is a key performance metric management uses to assess the health and growth trajectory of our Software segment, and is calculated by using the current quarter’s recurring revenue and then multiplying that value by four. ARR includes annualized March 2025 HashiCorp recurring revenue. This value includes the following consumption models: (1) software subscription agreements, including committed term licenses, (2) as-a-service arrangements such as SaaS and PaaS, and (3) maintenance and support contracts. ARR should be viewed independently of software revenue as this performance metric and its inputs may not represent revenue that will be recognized in future periods.
| (Dollars in millions) | Yr.-to-Yr. Percent/ Margin Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Software: | ||||||||||||||||||||
| Gross profit | $ | 5,294 | $ | 4,860 | 8.9 | % | ||||||||||||||
| Gross profit margin | 83.6 | % | 82.4 | % | 1.2 | pts. | ||||||||||||||
| Segment profit | $ | 1,847 | $ | 1,500 | 23.2 | % | ||||||||||||||
| Segment profit margin | 29.1 | % | 25.4 | % | 3.7 | pts. |
Software gross profit margin increased 1.2 points to 83.6 percent in the first quarter of 2025 compared to the prior-year period. Segment profit of $1,847 million increased 23.2 percent and segment profit margin of 29.1 percent increased 3.7 points compared to the prior-year period. Both segment gross profit and segment profit dollar growth and margin
Management Discussion – (continued)
expansion reflect our operating leverage driven by our revenue performance and portfolio mix as well as the benefits from our continued productivity actions and innovations within the software portfolio.
Consulting
| (Dollars in millions) | Yr.-to-Yr. Percent Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 (1) | ||||||||||||||||||||||||
| Consulting revenue: | $ | 5,068 | $ | 5,186 | (2.3) | % | (0.5) | % | ||||||||||||||||||
| Strategy and Technology | $ | 2,782 | $ | 2,863 | (2.8) | % | (1.1) | % | ||||||||||||||||||
| Intelligent Operations | 2,286 | 2,323 | (1.6) | 0.4 |
(1)Recast to reflect January 2025 changes to the reported revenue categories.
Consulting revenue of $5,068 million decreased 2.3 percent as reported (0.5 percent adjusted for currency) in the first quarter of 2025 compared to the prior-year period. Within Consulting, Strategy and Technology provides strategy, process design, system implementation, and cloud architecture and implementation services. In the first quarter, Strategy and Technology had declines in strategy and process design, which are more discretionary in nature, partially offset by growth in technology consulting, and supply chain and business application transformations. Intelligent Operations delivers application, cloud platform, and operations services. The revenue performance this quarter within Intelligent Operations reflects a sequential improvement compared to the year-to-year performance in fourth-quarter 2024, as clients focus on the cost and productivity savings provided by our application management services.
| (Dollars in millions) | Yr.-to-Yr. Percent/ Margin Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Consulting: | ||||||||||||||||||||
| Gross profit | $ | 1,381 | $ | 1,314 | 5.2 | % | ||||||||||||||
| Gross profit margin | 27.3 | % | 25.3 | % | 1.9 | pts. | ||||||||||||||
| Segment profit | $ | 558 | $ | 424 | 31.6 | % | ||||||||||||||
| Segment profit margin | 11.0 | % | 8.2 | % | 2.8 | pts. |
In the first quarter of 2025, Consulting gross profit margin of 27.3 percent increased 1.9 points on a year-to-year basis. Segment profit of $558 million increased 31.6 percent and segment profit margin of 11.0 percent increased 2.8 points year to year. The gross profit margin expansion and increase in segment profit and margin reflect the benefits from the productivity actions we have taken.
Consulting Signings and Book-to-Bill
| (Dollars in millions) | Yr.-to-Yr. Percent Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Total Consulting signings | $ | 4,934 | $ | 5,511 | (10.5) | % | (9.5) | % |
In the first quarter of 2025, Consulting signings decreased 10.5 percent as reported and 9.5 percent adjusted for currency compared to the prior-year period. However, we had solid growth in backlog during the quarter. The uncertainty within the current macroeconomic environment is impacting client spending, particularly on more discretionary projects, and is elongating the decision-making process on large, higher value projects. Clients also continue to reprioritize their IT budgets to prepare for investments in generative AI. Our book-to-bill ratio for the trailing twelve-months was over 1.15. Book-to-bill represents the ratio of IBM Consulting signings to its revenue over the same period. The metric is a useful indicator of the demand of our business over time.
Management Discussion – (continued)
Signings are management’s initial estimate of the value of a client’s commitment under a services contract within IBM Consulting. There are no third-party standards or requirements governing the calculation of signings. The calculation used by management involves estimates and judgments to gauge the extent of a client’s commitment, including the type and duration of the agreement, and the presence of termination charges or wind-down costs.
Contract extensions and increases in scope are treated as signings only to the extent of the incremental new value. Total signings can vary over time due to a variety of factors including, but not limited to, the timing of signing a small number of larger contracts. Signings associated with an acquisition will be recognized on a prospective basis.
Management believes the estimated values of signings disclosed provide an indication of our forward-looking revenue. Signings are used to monitor the performance of the business and viewed as useful information for management and shareholders. The conversion of signings into revenue may vary based on the types of services and solutions, contract duration, customer decisions, and other factors, which may include, but are not limited to, the macroeconomic environment.
Infrastructure
| (Dollars in millions) | Yr.-to-Yr. Percent Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Infrastructure revenue: | $ | 2,886 | $ | 3,076 | (6.2) | % | (4.3) | % | ||||||||||||||||||
| Hybrid Infrastructure | $ | 1,646 | $ | 1,803 | (8.7) | % | (7.5) | % | ||||||||||||||||||
| IBM Z | (15.3) | (14.3) | ||||||||||||||||||||||||
| Distributed Infrastructure | (5.0) | (3.7) | ||||||||||||||||||||||||
| Infrastructure Support | 1,240 | 1,273 | (2.6) | 0.3 |
Infrastructure revenue of $2,886 million decreased 6.2 percent as reported and 4.3 percent adjusted for currency in the first quarter of 2025 compared to the prior-year period, reflecting the impact of product cycle dynamics in both Hybrid Infrastructure and Infrastructure Support. Hybrid Infrastructure revenue decreased primarily driven by IBM Z. This quarter represents the twelfth quarter of the z16 program, which continues to deliver strong performance in both total revenue and capacity over the life of the program. In April, we announced the launch of the IBM z17 which will be available in June, offering enhanced AI acceleration through multi-model AI capabilities, new security features to protect data, and tools that leverage AI for improving system usability. The z17 expands our value proposition to clients, including lower power requirements, larger capacity growth and increased performance over z16. Distributed Infrastructure revenue decreased reflecting product cycle dynamics that are impacting our Power business, while Storage had another quarter of double-digit growth as our latest innovations continue to address the increasing data demands of our clients. Infrastructure Support revenue decreased as reported, but grew adjusted for currency, as the business continues to stabilize.
| (Dollars in millions) | Yr.-to-Yr. Percent/ Margin Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Infrastructure: | ||||||||||||||||||||
| Gross profit | $ | 1,522 | $ | 1,666 | (8.6) | % | ||||||||||||||
| Gross profit margin | 52.8 | % | 54.2 | % | (1.4) | pts. | ||||||||||||||
| Segment profit | $ | 248 | $ | 311 | (20.3) | % | ||||||||||||||
| Segment profit margin | 8.6 | % | 10.1 | % | (1.5) | pts. |
Infrastructure gross profit margin of 52.8 percent decreased 1.4 points in the first quarter of 2025 compared to the prior-year period, driven primarily by gross margin declines within Hybrid Infrastructure mainly due to mix resulting from product cycle dynamics. Infrastructure segment profit of $248 million decreased 20.3 percent and segment profit margin of 8.6 percent decreased 1.5 points compared to the prior-year period. The year-to-year decrease in segment profit and margin reflects the revenue decline due to product cycle dynamics and continued investments in innovation for our next generation
Management Discussion – (continued)
of products, partially offset by the benefits from productivity actions and higher IP and custom development income year to year.
Financing
Refer to pages 60 through 61 for a discussion of Financing’s segment results.
Geographic Revenue
In addition to the revenue presentation by reportable segment, we also measure revenue performance on a geographic basis.
| (Dollars in millions) | Yr.-to-Yr. Percent Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Total Revenue | $ | 14,541 | $ | 14,462 | 0.6 | % | 2.3 | % | ||||||||||||||||||
| Americas | $ | 7,206 | $ | 7,296 | (1.2) | % | 0.0 | % | ||||||||||||||||||
| Europe/Middle East/Africa (EMEA) | 4,552 | 4,313 | 5.6 | 7.7 | ||||||||||||||||||||||
| Asia Pacific | 2,783 | 2,853 | (2.4) | 0.0 |
Geographic revenue performance for the three months ended March 31, 2025:
Americas revenue of $7,206 million decreased 1.2 percent as reported, but was flat adjusted for currency in the first quarter of 2025 compared to the prior-year period. The U.S. was flat year to year. Canada decreased 7.1 percent as reported and 1.7 percent adjusted for currency. Latin America decreased 1.4 percent as reported, but increased 6.0 percent adjusted for currency, with Brazil decreasing 5.8 percent as reported, but increasing 5.4 percent adjusted for currency.
In EMEA, total revenue of $4,552 million increased 5.6 percent as reported and 7.7 percent adjusted for currency. The UK, Italy, and France increased 10.7 percent, 6.7 percent and 3.1 percent, respectively, as reported, and 11.1 percent, 9.2 percent and 5.8 percent, respectively, adjusted for currency. Germany decreased 2.0 percent as reported, but increased 0.7 percent adjusted for currency.
Asia Pacific revenue of $2,783 million decreased 2.4 percent as reported, but was flat adjusted for currency. Japan decreased 0.3 percent as reported, but increased 2.0 percent adjusted for currency. China decreased 26.8 percent as reported and 26.2 percent adjusted for currency. India and Australia decreased 1.5 percent and 1.3 percent, respectively, as reported, but increased 2.7 percent and 3.3 percent, respectively, adjusted for currency.
Expense
Total Expense and Other (Income)
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Total expense and other (income) (1) | $ | 6,873 | $ | 6,669 | 3.1 | % | ||||||||||||||
| Non-operating adjustments: | ||||||||||||||||||||
| Amortization of acquired intangible assets | $ | (294) | $ | (257) | 14.4 | % | ||||||||||||||
| Acquisition-related charges | (63) | (60) | 3.8 | |||||||||||||||||
| Non-operating retirement-related (costs)/income | (23) | (96) | (76.5) | |||||||||||||||||
| Operating (non-GAAP) expense and other (income) (1) | $ | 6,494 | $ | 6,255 | 3.8 | % | ||||||||||||||
| Total expense-to-revenue ratio | 47.3 | % | 46.1 | % | 1.2 | pts. | ||||||||||||||
| Operating (non-GAAP) expense-to-revenue ratio | 44.7 | % | 43.3 | % | 1.4 | pts. |
(1)2024 includes a pre-tax gain of $241 million from the divestiture of The Weather Company assets.
Management Discussion – (continued)
For additional information regarding total expense and other (income) for both expense presentations, refer to the following analyses by category.
Selling, General and Administrative Expense
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Selling, general and administrative expense: | ||||||||||||||||||||
| Selling, general and administrative — other | $ | 3,806 | $ | 3,915 | (2.8) | % | ||||||||||||||
| Advertising and promotional expense | 238 | 279 | (14.5) | |||||||||||||||||
| Workforce rebalancing charges | 316 | 375 | (15.8) | |||||||||||||||||
| Amortization of acquired intangible assets | 294 | 257 | 14.4 | |||||||||||||||||
| Stock-based compensation | 217 | 171 | 26.8 | |||||||||||||||||
| Provision for/(benefit from) expected credit loss expense | 14 | (23) | nm | |||||||||||||||||
| Total selling, general and administrative expense | $ | 4,886 | $ | 4,974 | (1.8) | % | ||||||||||||||
| Non-operating adjustments: | ||||||||||||||||||||
| Amortization of acquired intangible assets | $ | (294) | $ | (257) | 14.4 | % | ||||||||||||||
| Acquisition-related charges | (58) | (10) | nm | |||||||||||||||||
| Operating (non-GAAP) selling, general and administrative expense | $ | 4,533 | $ | 4,706 | (3.7) | % |
nm - not meaningful
Total selling, general and administrative (SG&A) expense decreased 1.8 percent in the first quarter of 2025 versus the prior-year period driven primarily by the following factors:
-
Lower spending reflecting the benefits from productivity actions focused on transforming our enterprise operations (4 points);
-
Lower workforce rebalancing charges (1 point); and
-
The effects of currency (1 point); partially offset by
-
Higher operating expenses from acquired businesses (2 points); and
-
Higher acquisition-related charges and amortization of acquired intangible assets (2 points).
Operating (non-GAAP) SG&A expense decreased 3.7 percent year to year primarily driven by the same factors above, excluding the higher acquisition-related charges and amortization of acquired intangible assets.
Expected credit loss expense was a provision of $14 million in the first quarter of 2025 compared to a benefit of $23 million in the prior-year period. The year-to-year change was primarily driven by higher unallocated reserve requirements in the current year as a result of the current economic conditions. Refer to “Receivables and Allowances” section on page 54 for additional information.
Management Discussion – (continued)
Research and Development
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Research and development expense | $ | 1,950 | $ | 1,796 | 8.6 | % | ||||||||||||||||||||
| Non-operating adjustments: | ||||||||||||||||||||||||||
| Acquisition-related charges | (4) | — | nm | |||||||||||||||||||||||
| Operating (non-GAAP) research and development expense | $ | 1,946 | $ | 1,796 | 8.3 % | |||||||||||||||||||||
nm - not meaningful
Research and development (R&D) expense and operating (non-GAAP) R&D expense, increased 8.6 percent and 8.3 percent, respectively, in the first quarter of 2025. The year-to-year increase in R&D expense was primarily driven by investments to drive innovation in AI, hybrid cloud and quantum; partially offset by the effects of currency (1 point).
Intellectual Property and Custom Development Income
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Intellectual property and custom development income: | ||||||||||||||||||||||||||
| Intellectual property income (1) | $ | 63 | $ | 72 | (12.9) | % | ||||||||||||||||||||
| Custom development income | 190 | 144 | 31.9 | |||||||||||||||||||||||
| Total | $ | 253 | $ | 216 | 16.9 | % |
(1)Includes licensing, royalty-based fees and sales.
Total intellectual property and custom development income increased 16.9 percent year to year. The increase was primarily driven by joint development and licensing agreements with a Japanese consortium to leverage our intellectual property and expertise on advanced semiconductors.
The timing and amount of licensing and sales of IP may vary significantly from period to period depending upon the timing of licensing agreements, economic conditions, industry consolidation and the timing of new patents and know-how development.
Other (Income) and Expense
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Other (income) and expense: | ||||||||||||||||||||
| (Gains)/losses on foreign currency transactions | $ | 443 | $ | (205) | nm | |||||||||||||||
| (Gains)/losses on derivative instruments | (442) | 287 | nm | |||||||||||||||||
| Interest income | (191) | (210) | (9.3) | % | ||||||||||||||||
| Net (gains)/losses from securities and investment assets | 29 | (10) | nm | |||||||||||||||||
| Retirement-related costs/(income) | 23 | 96 | (76.5) | |||||||||||||||||
| Other | (26) | (274) | (90.4) | |||||||||||||||||
| Total other (income) and expense | $ | (165) | $ | (317) | (48.1) | % | ||||||||||||||
| Non-operating adjustments: | ||||||||||||||||||||
| Acquisition-related charges | $ | — | $ | (50) | (100.0) | % | ||||||||||||||
| Non-operating retirement-related (costs)/income | (23) | (96) | (76.5) | |||||||||||||||||
| Operating (non-GAAP) other (income) and expense | $ | (187) | $ | (463) | (59.6) | % | ||||||||||||||
nm - not meaningful
Management Discussion – (continued)
Total other (income) and expense was income of $165 million in the first quarter of 2025 and decreased $152 million compared to the prior-year period. The year-to-year change was primarily driven by:
-
Lower gains on divestitures of $244 million, primarily driven by the divestiture of The Weather Company assets in the first-quarter 2024 (included in “Other” in the table above); partially offset by
-
Lower net exchange losses (including derivative instruments) of $81 million. The prior-year (gains)/losses on derivative instruments included a loss of $50 million on foreign exchange derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG (also included in “Acquisition-related charges” in the table above). Refer to note 16, “Derivative Financial Instruments,” for additional information; and
-
Lower non-operating retirement-related cost of $73 million. Refer to “Retirement-Related Plans” for additional information.
Operating (non-GAAP) other (income) and expense was income of $187 million in the first quarter of 2025 and decreased $276 million compared to the prior-year period. The year-to-year change was primarily driven by the factors described above, excluding the lower non-operating retirement related costs and the acquisition-related charges.
Interest Expense
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Interest expense | $ | 455 | $ | 432 | 5.4 | % |
Interest expense of $455 million in the first quarter of 2025 increased $23 million compared to the prior-year period. Interest expense is presented in cost of financing in the Consolidated Income Statement if the related external borrowings are to support the Financing external business. Overall interest expense (excluding capitalized interest) for the first quarter of 2025 was $542 million, an increase of $25 million year to year primarily driven by higher average interest rates in the current year.
Retirement-Related Plans
The following tables provide the total pre-tax cost for all retirement-related plans. The operating cost amounts are included in the Consolidated Income Statement within the caption (e.g., Cost, SG&A, R&D) relating to the job function of the plan participants. The non-operating cost amounts are included in other (income) and expense.
| (Dollars in millions) | Yr.-to-Yr. Percent Change | |||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||
| Retirement-related plans — cost: | ||||||||||||||||||||
| Service cost | $ | 130 | $ | 143 | (8.9) | % | ||||||||||||||
| Multi-employer plans | 3 | 4 | (9.3) | |||||||||||||||||
| Cost of defined contribution plans | 110 | 111 | (1.1) | |||||||||||||||||
| Total operating costs | $ | 243 | $ | 257 | (5.5) | % | ||||||||||||||
| Interest cost | $ | 476 | $ | 558 | (14.7) | % | ||||||||||||||
| Expected return on plan assets | (614) | (730) | (15.9) | |||||||||||||||||
| Recognized actuarial losses | 152 | 259 | (41.4) | |||||||||||||||||
| Amortization of prior service costs/(credits) | (2) | (2) | 10.4 | |||||||||||||||||
| Curtailments/settlements | 2 | 2 | 0.0 | |||||||||||||||||
| Other costs | 8 | 8 | (0.2) | |||||||||||||||||
| Total non-operating costs/(income) | $ | 23 | $ | 96 | (76.5) | % | ||||||||||||||
| Total retirement-related plans — cost | $ | 266 | $ | 353 | (24.8) | % |
Management Discussion – (continued)
Total pre-tax retirement-related plan cost decreased by $88 million compared to the first quarter of 2024, primarily driven by a decrease in recognized actuarial losses ($107 million), and lower interest costs ($82 million), partially offset by lower expected return on plan assets ($116 million).
As described in the “Operating (non-GAAP) Earnings” section, management characterizes certain retirement-related costs as operating and others as non-operating. Utilizing this characterization, operating retirement-related costs in the first quarter of 2025 were $243 million, a decrease of $14 million compared to the first quarter of 2024. The decrease was primarily driven by lower service cost ($13 million). Non-operating costs/(income) was $23 million of cost in the first quarter of 2025 compared to $96 million in the prior-year period.
The year-to-year decrease in recognized actuarial losses was primarily driven by the prior year U.S. and Canada pension transfers which accelerated the recognition of actuarial losses in the second half of 2024. Refer to note U, “Retirement-Related Benefits,” in our 2024 Annual Report for additional information.
Taxes
The continuing operations provision for income taxes in the first quarter of 2025 was $103 million, compared to a benefit from income taxes of $502 million in the first quarter of 2024. The prior-year tax benefit was primarily driven by the resolution of certain tax audit matters. The operating (non-GAAP) provision for income taxes in the first quarter of 2025 was $221 million, compared to $94 million in the first quarter of 2024. The operating (non-GAAP) income tax provision year-to-year change was primarily driven by the same factor described above.
IBM’s tax provision and effective tax rate are impacted by recurring factors including the geographical mix of income before taxes, incentives, specific transactions, changes in unrecognized tax benefits and discrete tax events, such as the settlement of income tax audits and changes in or new interpretations of tax laws. The GAAP tax provision and effective tax rate could also be affected by adjustments to the previously recorded charges for U.S. tax reform attributable to any changes in law, new regulations and guidance, and audit adjustments, among others.
The U.S. Internal Revenue Service (IRS) has proposed adjustments related to certain cross-border transactions with respect to the company’s 2013-2014 and 2015-2016 U.S. income tax returns, which if sustained, would increase the company’s income subject to tax by approximately $4.2 billion for the 2013-2014 audit cycle and approximately $1.2 billion for the 2015-2016 audit cycle, with tax calculated at the relevant federal income tax rate. The company strongly disagrees with the IRS’ positions, filed IRS Appeals protests, and will pursue resolution at court, if necessary. In 2021, the IRS commenced its audit of the company’s U.S. tax returns for 2017-2018, which the company anticipates will be completed in 2025. With respect to major U.S. state and foreign taxing jurisdictions, the company is generally no longer subject to tax examinations for years prior to 2016. The company is no longer subject to income tax examination of its U.S. federal tax return for years prior to 2013. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as it relates to the amount and/or timing of income, deductions, and tax credits. Although the outcome of tax audits is always uncertain, the company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result for these years.
The company is involved in a number of income tax-related matters in India challenging tax assessments issued by the India Tax Authorities. As of March 31, 2025, the company had recorded approximately $430 million as prepaid income taxes in India. A significant portion of this balance represents cash tax deposits paid over time to protect the company’s right to appeal various income tax assessments made by the India Tax Authorities. Although the outcome of tax audits is always uncertain, the company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result for these years.
The amount of unrecognized tax benefits at March 31, 2025 is $8,905 million which can be reduced by $617 million associated with timing adjustments, potential transfer pricing adjustments, and state income taxes. The net amount of $8,288 million, if recognized, would favorably affect the company’s effective tax rate.
Management Discussion – (continued)
Financial Position
Dynamics
Our balance sheet at March 31, 2025 continues to provide us with financial flexibility to support and invest in the business.
Cash and cash equivalents, restricted cash and marketable securities at March 31, 2025 were $17,592 million, an increase of $2,788 million compared to December 31, 2024. Total debt of $63,284 million at March 31, 2025 increased $8,311 million compared to December 31, 2024 primarily driven by the first-quarter 2025 debt issuances to increase our financial liquidity and plan for our future debt maturities. We continue to manage our debt levels while being acquisitive and without sacrificing investments in our business.
In the first three months of 2025, we generated $4,370 million in cash from operating activities, an increase of $202 million compared to the first three months of 2024. Our free cash flow for the three months ended March 31, 2025 was $1,962 million, an increase of $52 million versus the prior-year period. Refer to pages 58 through 59 for additional information on free cash flow. We invested $7,098 million in acquisitions primarily for the acquisition of HashiCorp which completed this quarter and we returned $1,549 million to shareholders through dividends in the first three months of 2025.
Our pension plans were well funded at the end of 2024, with worldwide qualified plans funded at 116 percent. Overall pension funded status as of the end of March 2025 was fairly consistent with year-end 2024. We expect contributions for all retirement-related plans to be approximately $1.3 billion in 2025, essentially flat compared to the prior year.
IBM Working Capital
| (Dollars in millions) | At March 31, 2025 | At December 31, 2024 | ||||||||||||
| Current assets | $ | 35,336 | $ | 34,482 | ||||||||||
| Current liabilities | 35,106 | 33,142 | ||||||||||||
| Working capital | $ | 231 | $ | 1,340 | ||||||||||
| Current ratio | 1.01:1 | 1.04:1 |
Working capital decreased $1,109 million from the year-end 2024 position. Current assets increased $854 million ($358 million adjusted for currency) primarily due to an increase in cash and cash equivalents, restricted cash and marketable securities; partially offset by decreases in receivables mainly from collections of seasonally higher year-end balances. Current liabilities increased $1,964 million ($1,473 million adjusted for currency) primarily due to an increase in short-term debt driven by reclassifications from long-term debt net of maturities and continued growth in deferred income, reflecting annual customer billings; partially offset by decreases in taxes payable and accounts payable.
Receivables and Allowances
Roll Forward of Total IBM Receivables Allowance for Credit Losses
| (Dollars in millions) | ||||||||||||||||||||||||||
| January 1, 2025 | Additions / (Releases) (1) | Write-offs (2) | Foreign currency and other | March 31, 2025 | ||||||||||||||||||||||
| $273 | $9 | $(8) | $10 | $284 |
(1)Additions/(Releases) for allowance for credit losses are recorded in expense.
(2)Refer to note A, “Significant Accounting Policies,” in our 2024 Annual Report for additional information regarding allowance for credit loss write-offs.
Management Discussion – (continued)
Excluding receivables classified as held for sale, the total IBM receivables provision coverage was 1.6 percent at March 31, 2025, an increase of 20 basis points compared to December 31, 2024. The increase in coverage is primarily driven by a decrease in total receivables due to seasonally higher balances at year end and an increase in the unallocated allowance for credit losses on financing receivables. The majority of the write-offs during the three months ended March 31, 2025 were related to receivables which had been previously reserved. Refer to Financing's “Balance Sheet and Return on Equity Highlights” on page 60 for additional details regarding the Financing segment receivables and allowances.
Noncurrent Assets and Liabilities
| (Dollars in millions) | At March 31, 2025 | At December 31, 2024 | ||||||||||||
| Noncurrent assets | $ | 110,331 | $ | 102,693 | ||||||||||
| Long-term debt | $ | 56,371 | $ | 49,884 | ||||||||||
| Noncurrent liabilities (excluding debt) | $ | 27,237 | $ | 26,756 |
Noncurrent assets increased $7,638 million ($6,795 million adjusted for currency) primarily due to an increase in goodwill and intangible assets from the HashiCorp acquisition.
Long-term debt increased $6,487 million ($5,860 million adjusted for currency) primarily driven by our first-quarter 2025 debt issuances; partially offset by reclassifications to short-term debt to reflect upcoming maturities.
Noncurrent liabilities (excluding debt) increased $481 million (decreased $34 million adjusted for currency) primarily driven by currency and an increase in deferred income, partially offset by a decrease in retirement and nonpension postretirement benefit obligations.
Debt
Our funding requirements are continually monitored as we execute our strategies to manage the overall asset and liability profile. Additionally, we maintain sufficient flexibility to access global funding sources as needed.
| (Dollars in millions) | At March 31, 2025 | At December 31, 2024 | ||||||||||||
| Total debt | $ | 63,284 | $ | 54,973 | ||||||||||
| Financing segment debt (1) | $ | 10,022 | $ | 12,116 | ||||||||||
| Non-Financing debt | $ | 53,262 | $ | 42,858 |
(1)Refer to Financing’s “Balance Sheet and Return on Equity Highlights” on page 60 for additional details.
Total debt of $63,284 million increased $8,311 million ($7,671 million adjusted for currency) from December 31, 2024, primarily driven by proceeds from issuances of $8,378 million; partially offset by maturities of $1,257 million.
Non-Financing debt of $53,262 million increased $10,405 million ($9,868 million adjusted for currency) from December 31, 2024, primarily due to the first-quarter debt issuances to increase our financial liquidity and plan for our future debt maturities; partially offset by maturities within the quarter.
Financing segment debt of $10,022 million decreased $2,094 million ($2,197 million adjusted for currency) from December 31, 2024, primarily due to lower funding requirements associated with financing receivables.
Financing provides financing solutions predominantly for IBM’s external client assets, and the debt used to fund Financing assets is primarily comprised of intercompany loans. Total debt changes generally correspond with the level of client and commercial financing receivables, the level of cash and cash equivalents, the change in intercompany and external payables, and the change in intercompany investment from IBM. The terms of the intercompany loans are set by the company to substantially match the term, currency and interest rate variability underlying the financing receivable. The Financing debt-to-equity ratio remained at 9.0 to 1 at March 31, 2025.
Management Discussion – (continued)
Interest expense relating to debt supporting Financing’s external client and internal business is included in the “Financing Results of Operations” and in note 4, “Segments.” In the Consolidated Income Statement, the external debt-related interest expense supporting Financing’s internal financing to the company is classified as interest expense.
Equity
Total equity decreased $440 million from December 31, 2024, primarily driven by dividends paid of $1,549 million; partially offset by an increase from net income of $1,055 million.
Cash Flow
Our cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows on page 7, are summarized in the table below. These amounts also include the cash flows associated with the Financing business.
| (Dollars in millions) | ||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||
| Net cash provided by/(used in): | ||||||||||||||
| Operating activities | $ | 4,370 | $ | 4,168 | ||||||||||
| Investing activities | (12,979) | (4,210) | ||||||||||||
| Financing activities | 5,443 | 1,877 | ||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 167 | (159) | ||||||||||||
| Net change in cash, cash equivalents and restricted cash | $ | (2,999) | $ | 1,676 |
Net cash provided by operating activities increased $202 million as compared to the first three months of 2024. This was due to performance-related improvements within net income, and an increase in cash provided by financing receivables; partially offset by balance sheet dynamics. Changes in operating assets and liabilities, net of acquisitions/divestitures in the Consolidated Statement of Cash Flows also includes the reduction of tax reserves in the first quarter of 2024, which represents a non-cash adjustment to reconcile net income to cash from operating activities.
Net cash used in investing activities increased $8,769 million primarily driven by the HashiCorp acquisition, higher net purchases of marketable securities and other investments, and a decrease in cash provided by divestitures as the first quarter 2024 included the sale of The Weather Company assets.
Net cash provided by financing activities increased by $3,566 million primarily driven by a higher level of net debt issuances in the current-year period.
Looking Forward
Technology remains a key competitive advantage which allows businesses to drive cost efficiencies, productivity, and to fuel growth and transformation. It is clear that technology is playing a significant role as the value of hybrid cloud, automation, data sovereignty, and on-prem solutions becomes even more critical in today’s environment. AI-driven productivity continues to be a priority for businesses for both cost reductions and new revenue opportunities.
Enterprise AI continues to gain traction. The portfolio of AI offerings we have built, including cost efficient, fit-for-purpose open-source models deployed in hybrid environments, is focused on helping businesses scale AI and generate return through productivity improvements and automation. In Software, IBM watsonx provides a robust portfolio of AI products for developing AI apps, managing data, and governing the entire lifecycle of AI models. In April, we announced the upcoming launch of the IBM z17, which delivers enhanced AI acceleration through multi-model AI capabilities. We continue to see Infrastructure play a larger role, enabling hybrid cloud environments for mission-critical transactions and AI workloads, as clients bring AI to their data. In Consulting, our experts are helping clients design and execute AI strategies by leveraging the IBM Consulting Advantage platform, an AI delivery platform designed to implement solutions at scale, transforming how our consultants work and harnessing AI across every stage of the project lifecycle.
We remain focused on accelerating innovation speed and impact, and we continue to invest in emerging technologies, including Quantum, bringing new innovations to market. To complement our portfolio, we completed three acquisitions in
Management Discussion – (continued)
the first three months of 2025, including the previously announced acquisition of HashiCorp, which brings leading automation and security tools that integrate with our hybrid cloud strategy.
Our performance this quarter reflects the continued success of our focused strategy around hybrid cloud and AI. For the last several years, we have been strengthening our portfolio and building on consistency in execution. Over the longer term, we are focused on delivering on our financial model presented at Investor Day earlier this year.
There are areas of our portfolio that could see greater variability in the event that the macroeconomic environment deteriorates. This includes Consulting which is more sensitive to discretionary pullbacks and DOGE related initiatives, consumption-based services in Software, including in Red Hat, and areas of Distributed Infrastructure. As we look forward to the remainder of 2025, we expect to remain disciplined about managing our spending. The strength of our balance sheet and strong liquidity position allow us to make investments in our business for the long-term.
While there is uncertainty, we believe our focused portfolio, disciplined investments in innovation, diverse set of businesses and clients, relentless focus on productivity, and strong liquidity position drive the durability of our performance.
Retirement-Related Plans
Our pension plans are well funded. Contributions for all retirement-related plans are expected to be approximately $1.3 billion in 2025, essentially flat compared to 2024, of which $0.1 billion generally relates to legally required contributions to non-U.S. defined benefit and multi-employer plans. We expect 2025 pre-tax retirement-related plan cost to be approximately $1.1 billion. This estimate reflects current pension plan assumptions at December 31, 2024. Within total retirement-related plan cost, operating retirement-related plan cost is expected to be approximately $1.0 billion in 2025, essentially flat compared to 2024. Non-operating retirement-related plan cost is expected to be approximately $0.1 billion, a decrease of approximately $3.3 billion compared to 2024, primarily driven by the $3.1 billion pension settlement charges resulting from the U.S. and Canada pension transfers in the second half of 2024, and lower recognized actuarial losses.
Currency Rate Fluctuations
Changes in the relative values of non-U.S. currencies to the U.S. dollar affect our financial results and financial position. Movements in currency, and the fact that we do not hedge 100 percent of our currency exposures, will result in a currency impact to our revenues, profit and cash flows throughout 2025. We execute a hedging program which defers, versus eliminates, the volatility of currency impacts on our financial results. During periods of sustained movements in currency, the marketplace and competition adjust to the changing rates over time.
References to “adjusted for currency” or “constant currency” reflect adjustments based upon a simple mathematical formula. However, this constant currency methodology that we utilize to disclose this information does not incorporate any operational actions that management could take to mitigate fluctuating currency rates. Based on the currency rate movements in the first quarter of 2025, revenue from continuing operations increased 0.6 percent as reported and 2 percent at constant currency compared to the prior year.
At March 31, 2025, currency changes resulted in assets and liabilities denominated in most local currencies being translated into more dollars than at year-end 2024. We use financial hedging instruments to limit specific currency risks related to foreign currency-based transactions.
We translate revenue, cost and expense in our non-U.S. operations at current exchange rates in the reported period. In the first quarter of 2025, the impact from currency translation and hedging to year-to-year pre-tax income, operating (non-GAAP) pre-tax income and segments profit margin growth was immaterial. Hedging and certain underlying foreign currency transaction gains and losses are allocated to our segment results. Considering the operational responses mentioned above, movements of exchange rates, and the nature and timing of hedging instruments, it is difficult to predict future currency impacts on any particular period.
For non-U.S. subsidiaries and branches that operate in U.S. dollars or whose economic environment is highly inflationary, translation adjustments are reflected in results of operations. Generally, we manage currency risk in these entities by linking prices and contracts to U.S. dollars.
Management Discussion – (continued)
Liquidity and Capital Resources
In our 2024 Annual Report, on pages 34 to 37, there is a discussion of our liquidity including two tables that present three years of data. The table presented on page 34 includes net cash from operating activities, cash and cash equivalents, restricted cash and short-term marketable securities, and the size of our global credit facilities for each of the past three years. For the three months ended, or at, as applicable, March 31, 2025, those amounts are $4.4 billion of net cash from operating activities, $17.6 billion of cash and cash equivalents, restricted cash and short-term marketable securities and $10.0 billion in global credit facilities, respectively. While we have no current plans to draw on these credit facilities, they are available as back-up liquidity.
The major rating agencies' ratings on our debt securities at March 31, 2025 appear in the following table and remain unchanged from December 31, 2024.
| IBM Ratings: | Standard and Poor's | Moody’s Investors Service | Fitch Ratings | |||||||||||||||||
| Senior long-term debt | A- | A3 | A- | |||||||||||||||||
| Commercial paper | A-2 | Prime-2 | F1 |
We have financial flexibility, supported by our strong liquidity position and cash flows, to operate at a single A credit rating. Debt levels have increased $8.3 billion from December 31, 2024 driven by debt issuances; partially offset by maturities. In the first quarter of 2025, we issued $8.4 billion of debt for general corporate purposes, including our future debt maturity obligations, as well as capital allocation priorities. Refer to note 12, “Borrowings,” for additional information.
We do not have “ratings trigger” provisions in our debt covenants or documentation, which would allow the holders to declare an event of default and seek to accelerate payments thereunder in the event of a change in credit rating. Our debt covenants are well within the required levels. Our contractual agreements governing derivative instruments contain standard market clauses which can trigger the termination of the agreement if our credit rating were to fall below investment grade. At March 31, 2025, the fair value of those instruments that were in a liability position was $608 million, before any applicable netting, and this position is subject to fluctuations in fair value period to period based on the level of our outstanding instruments and market conditions. We have no other contractual arrangements that, in the event of a change in credit rating, would result in a material adverse effect on our financial position or liquidity.
We prepare our Consolidated Statement of Cash Flows in accordance with applicable accounting standards for cash flow presentation on page 7 of this Form 10-Q and highlight causes and events underlying sources and uses of cash in that format on page 56. For the purpose of running its business, IBM manages, monitors and analyzes cash flows in a different manner.
Management uses free cash flow as a measure to evaluate its operating results, plan shareholder return levels, strategic investments and assess its ability and need to incur and service debt. The entire free cash flow amount is not necessarily available for discretionary expenditures. We define free cash flow as net cash from operating activities less the change in Financing receivables and net capital expenditures, including the investment in software and other asset sales. A key objective of the Financing business is to generate strong returns on equity, and our Financing receivables are the basis for that growth. Accordingly, management considers Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management includes presentations of both free cash flow and net cash from operating activities that exclude the effect of Financing receivables.
Management Discussion – (continued)
The following is management’s view of cash flows for the first three months of 2025 and 2024 prepared in a manner consistent with the description above.
| (Dollars in millions) | ||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||
| Net cash from operating activities per GAAP | $ | 4,370 | $ | 4,168 | ||||||||||
| Less: change in Financing receivables | 2,087 | 1,897 | ||||||||||||
| Net cash from operating activities, excluding Financing receivables | $ | 2,283 | $ | 2,271 | ||||||||||
| Capital expenditures, net | (321) | (361) | ||||||||||||
| Free cash flow | $ | 1,962 | $ | 1,910 | ||||||||||
| Change in Financing receivables (1) | 2,087 | 1,897 | ||||||||||||
| Acquisitions | (7,098) | (82) | ||||||||||||
| Divestitures | (1) | 703 | ||||||||||||
| Dividends | (1,549) | (1,522) | ||||||||||||
| Change in total debt (1) | 7,092 | 3,382 | ||||||||||||
| Other (1) | 128 | (313) | ||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash (1) | 167 | (159) | ||||||||||||
| Change in cash, cash equivalents, restricted cash and short-term marketable securities | $ | 2,788 | $ | 5,815 |
(1)Prior-year amounts have been reclassified to conform to the change in 2025 presentation.
In the first three months of 2025, we generated $2.0 billion in free cash flow, an increase of $0.1 billion versus the prior-year period. The increase was primarily driven by performance-related improvements within net income; partially offset by balance sheet dynamics. Given the current global trade dynamics, we proactively took actions to bolster our supply chain ahead of our z17 launch, resulting in higher inventory levels. In the first quarter of 2025, we invested $7.1 billion in acquisitions, including the acquisition of HashiCorp, and we continued to return value to shareholders with $1.5 billion in dividends.
Events that could temporarily change the historical cash flow dynamics discussed previously and in our 2024 Annual Report include significant changes in operating results, material changes in geographic sources of cash, unexpected adverse impacts from litigation, future pension funding requirements, periods of severe downturn in the capital markets or the timing of tax payments. Whether any litigation has such an adverse impact will depend on a number of variables, which are more completely described in note 14, “Contingencies,” in this Form 10-Q. With respect to pension funding, we expect to make legally mandated pension plan contributions to certain non-U.S. defined benefit plans of approximately $100 million in 2025. Contributions related to all retirement-related plans are expected to be approximately $1.3 billion in 2025. Refer to “Retirement-Related Plans” for additional information. Financial market performance could increase the legally mandated minimum contributions in certain non-U.S. countries that require more frequent remeasurement of the funded status. We are not quantifying any further impact from pension funding because it is not possible to predict future movements in the capital markets or changes in pension plan funding regulations. In 2025, we are not legally required to make any contributions to the U.S. defined benefit pension plans.
Our cash flows are sufficient to fund our current operations and obligations, including investing and financing activities such as dividends and debt service. When additional requirements arise, we have several liquidity options available. These options may include the ability to borrow additional funds at reasonable interest rates and utilizing our committed global credit facilities. Our overall shareholder payout remains at a comfortable level and we remain fully committed to our long-standing dividend policy. As discussed in our 2024 Annual Report on page 35, beginning with the first quarter of 2025, we are filing our quarterly reports on Form 10-Q closer to the timing of our quarterly earnings release, which may not coincide with the timing of our Board of Directors dividend approval process, as occurred this quarter. Any common stock dividend approval that occurs by the Board of Directors following this filing may be disclosed in a current report on Form 8-K.
Management Discussion – (continued)
Financing
Financing is a reportable segment that facilitates IBM clients’ acquisition of hardware, software and services by providing financing solutions, while generating solid returns on equity.
Results of Operations
| (Dollars in millions) | Yr.-to-Yr. Percent Change/ Margin Change | Yr.-to-Yr. Percent Change Adjusted For Currency | ||||||||||||||||||||||||
| For the three months ended March 31: | 2025 | 2024 | ||||||||||||||||||||||||
| Revenue | $ | 191 | $ | 193 | (0.8) | % | 2.2 | % | ||||||||||||||||||
| Segment profit | $ | 69 | $ | 92 | (25.5) | % | ||||||||||||||||||||
| Segment profit margin | 35.8 | % | 47.7 | % | (11.8) | pts. |
For the three months ended March 31, 2025, financing revenue decreased 0.8 percent as reported, but increased 2.2 percent adjusted for currency compared to the prior-year period.
Segment profit decreased 25.5 percent to $69 million and segment profit margin decreased (11.8) points to 35.8 percent, respectively, compared to the prior-year period driven primarily by higher unallocated credit loss reserve requirements in the current year which reflects current economic conditions.
Balance Sheet and Return on Equity Highlights
| (Dollars in millions) | At March 31, 2025 | At December 31, 2024 | ||||||||||||
| Client financing receivables (1) | $ | 9,593 | $ | 10,294 | ||||||||||
| Commercial financing receivables (1) (2) | $ | 1,042 | $ | 2,216 | ||||||||||
| Financing Segment Debt (3) | $ | 10,022 | $ | 12,116 | ||||||||||
| Equity | $ | 1,114 | $ | 1,346 |
(1)Refer to Note 9, “Financing Receivables” for additional information.
(2)Includes both held for investment and held for sale receivables. The 2024 amount has combined the balances at December 31, 2024 to conform to the changes in 2025 presentation.
(3)Financing segment debt is primarily comprised of intercompany loans.
Return on equity was 18.5 percent compared to 24.7 percent for the three months ended March 31, 2025 and 2024, respectively. The decrease was primarily driven by a decrease in net income. Return on equity is calculated as annualized after-tax segment profit divided by the average of the ending equity for Financing for the last two quarters. Annualized after-tax segment profit is a function of IBM's provision for income taxes determined on a consolidated basis.
Management Discussion – (continued)
The following table presents Client financing and Commercial financing receivables excluding receivables classified as held for sale.
| (Dollars in millions) | At March 31, 2025 | At December 31, 2024 | ||||||||||||
| Amortized cost | $ | 10,197 | $ | 11,738 | ||||||||||
| Specific allowance for credit losses | 101 | 99 | ||||||||||||
| Unallocated allowance for credit losses | 48 | 29 | ||||||||||||
| Total allowance for credit losses | 149 | 128 | ||||||||||||
| Net financing receivables | $ | 10,048 | $ | 11,611 | ||||||||||
| Allowance for credit losses coverage | 1.5 | % | 1.1 | % |
The percentage of Financing segment receivables reserved increased from 1.1 percent at December 31, 2024, to 1.5 percent at March 31, 2025, primarily driven by the decline in amortized cost as a result of seasonally higher year-end balances and an increase in unallocated allowance for credit losses which reflects current economic conditions.
We continue to apply our rigorous credit policies. Approximately 77 percent of the total external portfolio was with investment grade clients, an increase of 2 points as compared to December 31, 2024. This investment grade percentage is based on the credit ratings of the companies in the portfolio and reflects certain mitigating actions taken to reduce the risk to IBM. For additional information relating to the company's credit quality and mitigation actions, including sales of receivables, refer to note 9, “Financing Receivables”.
Management Discussion – (continued)
GAAP Reconciliation
The tables below provide a reconciliation of our income statement results as reported under GAAP to our operating earnings presentation which is a non-GAAP measure. Management’s calculation of operating (non-GAAP) earnings, as presented, may differ from similarly titled measures reported by other companies. Refer to the “Operating (non-GAAP) Earnings” section for management’s rationale for presenting operating earnings information.
| (Dollars in millions except per share amounts) | GAAP | Acquisition- Related Adjustments | Retirement- Related Adjustments | U.S. Tax Reform Impacts | Operating (non-GAAP) | |||||||||||||||||||||||||||
| For the three months ended March 31, 2025: | ||||||||||||||||||||||||||||||||
| Gross profit | $ | 8,031 | $ | 201 | $ | — | $ | — | $ | 8,232 | ||||||||||||||||||||||
| Gross profit margin | 55.2 | % | 1.4 | pts. | — | pts. | — | pts. | 56.6 | % | ||||||||||||||||||||||
| SG&A | $ | 4,886 | $ | (353) | $ | — | $ | — | $ | 4,533 | ||||||||||||||||||||||
| R&D | $ | 1,950 | $ | (4) | $ | — | $ | — | $ | 1,946 | ||||||||||||||||||||||
| Other (income) and expense | $ | (165) | $ | — | $ | (23) | $ | — | $ | (187) | ||||||||||||||||||||||
| Total expense and other (income) | $ | 6,873 | $ | (357) | $ | (23) | $ | — | $ | 6,494 | ||||||||||||||||||||||
| Pre-tax income from continuing operations | $ | 1,158 | $ | 557 | $ | 23 | $ | — | $ | 1,738 | ||||||||||||||||||||||
| Pre-tax margin from continuing operations | 8.0 | % | 3.8 | pts. | 0.2 | pts. | — | pts. | 12.0 | % | ||||||||||||||||||||||
| Provision for income taxes (1) | $ | 103 | $ | 128 | $ | (12) | $ | 2 | $ | 221 | ||||||||||||||||||||||
| Effective tax rate | 8.9 | % | 4.5 | pts. | (0.8) | pts. | 0.1 | pts. | 12.7 | % | ||||||||||||||||||||||
| Income from continuing operations | $ | 1,054 | $ | 429 | $ | 35 | $ | (2) | $ | 1,517 | ||||||||||||||||||||||
| Income margin from continuing operations | 7.3 | % | 3.0 | pts. | 0.2 | pts. | 0.0 | pts. | 10.4 | % | ||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 1.12 | $ | 0.45 | $ | 0.04 | $ | 0.00 | $ | 1.60 |
| (Dollars in millions except per share amounts) | GAAP | Acquisition- Related Adjustments | Retirement- Related Adjustments | U.S. Tax Reform Impacts (2) | Operating (non-GAAP) | |||||||||||||||||||||||||||
| For the three months ended March 31, 2024: | ||||||||||||||||||||||||||||||||
| Gross profit | $ | 7,742 | $ | 170 | $ | — | $ | — | $ | 7,913 | ||||||||||||||||||||||
| Gross profit margin | 53.5 | % | 1.2 | pts. | — | pts. | — | pts. | 54.7 | % | ||||||||||||||||||||||
| SG&A | $ | 4,974 | $ | (268) | $ | — | $ | — | $ | 4,706 | ||||||||||||||||||||||
| R&D | $ | 1,796 | $ | — | $ | — | $ | — | $ | 1,796 | ||||||||||||||||||||||
| Other (income) and expense (3) | $ | (317) | $ | (50) | $ | (96) | $ | — | $ | (463) | ||||||||||||||||||||||
| Total expense and other (income) | $ | 6,669 | $ | (318) | $ | (96) | $ | — | $ | 6,255 | ||||||||||||||||||||||
| Pre-tax income from continuing operations | $ | 1,074 | $ | 488 | $ | 96 | $ | — | $ | 1,658 | ||||||||||||||||||||||
| Pre-tax margin from continuing operations | 7.4 | % | 3.4 | pts. | 0.7 | pts. | — | pts. | 11.5 | % | ||||||||||||||||||||||
| Provision for/(benefit from) income taxes (1) | $ | (502) | $ | 142 | $ | 5 | $ | 448 | $ | 94 | ||||||||||||||||||||||
| Effective tax rate | (46.7) | % | 22.3 | pts. | 3.0 | pts. | 27.0 | pts. | 5.6 | % | ||||||||||||||||||||||
| Income from continuing operations | $ | 1,575 | $ | 346 | $ | 91 | $ | (448) | $ | 1,564 | ||||||||||||||||||||||
| Income margin from continuing operations | 10.9 | % | 2.4 | pts. | 0.6 | pts. | (3.1) | pts. | 10.8 | % | ||||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 1.69 | $ | 0.37 | $ | 0.10 | $ | (0.48) | $ | 1.68 |
(1)The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the GAAP pre-tax income.
(2)2024 includes a benefit from income taxes due to the resolution of certain tax audit matters.
(3)Acquisition-Related Adjustments in 2024 includes a loss of $50 million on foreign exchange derivative contracts entered into by the company prior to the acquisition of StreamSets and webMethods from Software AG. Refer to note 16, “Derivative Financial Instruments,” for additional information.
Management Discussion – (continued)
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company’s ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI and generative AI, including the company's increased offerings and use of AI-based technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity, privacy and AI considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this Form 10-Q speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
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