Item 1. Consolidated Financial Statements:

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Item 1. Consolidated Financial Statements:

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED INCOME STATEMENT

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions except per share amounts)	2025		2024		2025		2024
Revenue:
Services	$	7,682	$	7,405	$	14,962	$	14,876
Sales	9,129		8,195		16,199		14,994
Financing	166		169		357		361
Total revenue	16,977		15,770		31,519		30,231
Cost:
Services	5,280		5,126		10,282		10,365
Sales	1,630		1,607		3,034		2,988
Financing	90		86		194		186
Total cost	7,001		6,820		13,511		13,539
Gross profit	9,977		8,950		18,008		16,692
Expense and other (income):
Selling, general and administrative	5,027		4,938		9,913		9,912
Research and development	2,097		1,840		4,047		3,637
Intellectual property and custom development income	(215)		(241)		(468)		(458)
Other (income) and expense	(39)		(233)		(204)		(550)
Interest expense	510		427		965		859
Total expense and other (income)	7,380		6,730		14,253		13,399
Income from continuing operations before income taxes	2,597		2,219		3,755		3,293
Provision for/(benefit from) income taxes	404		389		507		(112)
Income from continuing operations	$	2,193	$	1,830	$	3,248	$	3,405
Income from discontinued operations, net of tax	1		4		1		34
Net income	$	2,194	$	1,834	$	3,249	$	3,439

Earnings per share of common stock:
Assuming dilution:
Continuing operations	$	2.31	$	1.96	$	3.43	$	3.65
Discontinued operations	0.00		0.00		0.00		0.04
Total	$	2.31	$	1.96	$	3.43	$	3.68
Basic:
Continuing operations	$	2.36	$	1.99	$	3.49	$	3.71
Discontinued operations	0.00		0.00		0.00		0.04
Total	$	2.36	$	1.99	$	3.50	$	3.74

Weighted-average number of common shares outstanding: (millions)
Assuming dilution	948.0		934.4		946.7		933.9
Basic	930.8		920.3		929.4		918.7

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024		2025		2024
Net income	$	2,194	$	1,834	$	3,249	$	3,439
Other comprehensive income/(loss), before tax:
Foreign currency translation adjustments	(613)		2		(956)		57
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	(5)		1		2		1
Reclassification of (gains)/losses to net income	—		—		—		—
Total net changes related to available-for-sale securities	(5)		1		2		1
Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	(82)		103		(141)		279
Reclassification of (gains)/losses to net income	(419)		(42)		(742)		28
Total unrealized gains/(losses) on cash flow hedges	(501)		61		(883)		307
Retirement-related benefit plans:
Prior service costs/(credits)	0		—		0		—
Net gains/(losses) arising during the period	0		0		0		1
Curtailments and settlements	5		2		7		4
Amortization of prior service costs/(credits)	(2)		(2)		(4)		(4)
Amortization of net (gains)/losses	157		258		308		519
Total retirement-related benefit plans	160		259		311		520
Other comprehensive income/(loss), before tax	(959)		322		(1,525)		885
Income tax (expense)/benefit related to items of other comprehensive income	493		(153)		753		(442)
Other comprehensive income/(loss), net of tax	(466)		169		(772)		442
Total comprehensive income	$	1,728	$	2,003	$	2,476	$	3,882

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

ASSETS


(Dollars in millions)	At June 30, 2025		At December 31, 2024
Assets:
Current assets:
Cash and cash equivalents	$	11,943	$	13,947
Restricted cash	83		214
Marketable securities	3,504		644
Notes and accounts receivable — trade (net of allowances of $109 in 2025 and $114 in 2024)	5,974		6,804
Short-term financing receivables:
Held for investment (net of allowances of $112 in 2025 and $109 in 2024)	5,586		6,259
Held for sale	746		900
Other accounts receivable (net of allowances of $41 in 2025 and $31 in 2024)	1,187		947
Inventory, at lower of average cost or net realizable value:
Finished goods	188		134
Work in process and raw materials	1,063		1,155
Total inventory	1,251		1,289
Deferred costs	1,182		959
Prepaid expenses and other current assets	2,796		2,520
Total current assets	34,253		34,482
Property, plant and equipment	18,160		17,691
Less: Accumulated depreciation	12,218		11,959
Property, plant and equipment — net	5,943		5,731
Operating right-of-use assets — net	3,315		3,197
Long-term financing receivables (net of allowances of $29 in 2025 and $19 in 2024)	6,171		5,353
Prepaid pension assets	7,983		7,492
Deferred costs	795		788
Deferred taxes	8,475		6,978
Goodwill	67,506		60,706
Intangible assets — net	12,253		10,660
Investments and sundry assets	1,891		1,787
Total assets	$	148,585	$	137,175

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET – (CONTINUED)

(UNAUDITED)

LIABILITIES AND EQUITY


(Dollars in millions except per share amounts)	At June 30, 2025		At December 31, 2024
Liabilities:
Current liabilities:
Taxes	$	1,681	$	2,033
Short-term debt	8,945		5,089
Accounts payable	3,974		4,032
Compensation and benefits	3,353		3,605
Deferred income	15,022		13,907
Operating lease liabilities	820		768
Other accrued expenses and liabilities	3,932		3,709
Total current liabilities	37,726		33,142
Long-term debt	55,219		49,884
Retirement and nonpension postretirement benefit obligations	9,882		9,432
Deferred income	3,913		3,622
Operating lease liabilities	2,735		2,655
Other liabilities	11,522		11,048
Total liabilities	120,998		109,783
Equity:
IBM stockholders’ equity:
Common stock, par value $0.20 per share, and additional paid-in capital	62,392		61,380
Shares authorized: 4,687,500,000
Shares issued: 2025 - 2,284,546,988
2024 - 2,279,164,313
Retained earnings	151,367		151,163
Treasury stock - at cost	(170,209)		(169,968)
Shares: 2025 - 1,353,027,746
2024 - 1,352,874,243
Accumulated other comprehensive income/(loss)	(16,041)		(15,269)
Total IBM stockholders’ equity	27,509		27,307
Noncontrolling interests	79		86
Total equity	27,588		27,393
Total liabilities and equity	$	148,585	$	137,175

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	Six Months Ended June 30,
(Dollars in millions)	2025		2024
Cash flows from operating activities:
Net income	$	3,249	$	3,439
Adjustments to reconcile net income to cash provided by operating activities:

Depreciation (1)	1,114		1,081
Amortization of capitalized software and acquired intangible assets	1,328		1,205
Stock-based compensation	842		636
Net (gain)/loss on divestitures, asset sales and other	(40)		(280)
Changes in operating assets and liabilities, net of acquisitions/divestitures	(421)		152
Net cash provided by operating activities	6,071		6,234

Cash flows from investing activities:
Payments for property, plant and equipment	(454)		(459)
Proceeds from disposition of property, plant and equipment/other	111		57
Investment in software	(314)		(358)
Purchases of marketable securities and other investments	(7,740)		(5,596)
Proceeds from disposition of marketable securities and other investments	4,962		3,917
Acquisition of businesses, net of cash acquired	(7,845)		(235)
Divestiture of businesses, net of cash transferred	(1)		703
Net cash provided by/(used in) investing activities	(11,281)		(1,971)

Cash flows from financing activities:
Proceeds from new debt	8,385		5,705
Payments to settle debt	(2,565)		(5,224)
Short-term borrowings/(repayments) less than 90 days — net	(29)		—
Common stock repurchases for tax withholdings	(437)		(350)
Proceeds from issuance of shares (2)	401		385
Financing — other (2)	(54)		(95)
Cash dividends paid	(3,112)		(3,058)
Net cash provided by/(used in) financing activities	2,589		(2,638)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	487		(236)
Net change in cash, cash equivalents and restricted cash	(2,134)		1,389

Cash, cash equivalents and restricted cash at January 1	14,160		13,089
Cash, cash equivalents and restricted cash at June 30	$	12,026	$	14,478

(1) Includes operating lease right-of-use assets amortization expense of $0.4 billion in 2025 and 2024.

(2) Prior-year amounts have been reclassified to conform to the change in 2025 presentation.

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF EQUITY

(UNAUDITED)


(Dollars in millions except per share amounts)	Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Total IBM Stockholders' Equity		Non- Controlling Interests		Total Equity
Equity - April 1, 2025	$	61,913	$	150,703	$	(170,160)	$	(15,575)	$	26,880	$	72	$	26,953
Net income plus other comprehensive income/(loss):
Net income			2,194						2,194				2,194
Other comprehensive income/(loss)							(466)		(466)				(466)
Total comprehensive income									$	1,728			$	1,728
Cash dividends paid — common stock ($1.68 per share)			(1,563)						(1,563)				(1,563)
Common stock issued under employee plans (1,896,410 shares)	479								479				479
Purchases (607,202 shares) and sales (833,460 shares) of treasury stock under employee plans — net			34		(49)				(15)				(15)
Changes in noncontrolling interests											7		7
Equity – June 30, 2025	$	62,392	$	151,367	$	(170,209)	$	(16,041)	$	27,509	$	79	$	27,588


(Dollars in millions except per share amounts)	Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Total IBM Stockholders' Equity		Non- Controlling Interests		Total Equity
Equity - April 1, 2024	$	60,145	$	151,362	$	(169,759)	$	(18,488)	$	23,261	$	72	$	23,333
Net income plus other comprehensive income/(loss):
Net income			1,834						1,834				1,834
Other comprehensive income/(loss)							169		169				169
Total comprehensive income									$	2,003			$	2,003
Cash dividends paid — common stock ($1.67 per share)			(1,537)						(1,537)				(1,537)
Common stock issued under employee plans (2,646,967 shares)	356								356				356
Purchases (856,885 shares) and sales (755,447 shares) of treasury stock under employee plans — net			(1)		(57)				(58)				(58)
Changes in noncontrolling interests											5		5
Equity - June 30, 2024	$	60,501	$	151,659	$	(169,815)	$	(18,319)	$	24,026	$	77	$	24,103

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

INTERNATIONAL BUSINESS MACHINES CORPORATION

AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF EQUITY – (CONTINUED)

(UNAUDITED)


(Dollars in millions except per share amounts)	Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Total IBM Stockholders' Equity		Non- Controlling Interests		Total Equity
Equity - January 1, 2025	$	61,380	$	151,163	$	(169,968)	$	(15,269)	$	27,307	$	86	$	27,393
Net income plus other comprehensive income/(loss):
Net income			3,249						3,249				3,249
Other comprehensive income/(loss)							(772)		(772)				(772)
Total comprehensive income									$	2,476			$	2,476
Cash dividends paid — common stock ($3.35 per share)			(3,112)						(3,112)				(3,112)
Common stock issued under employee plans (5,381,471 shares)	1,012								1,012				1,012
Purchases (1,708,409 shares) and sales (1,554,907 shares) of treasury stock under employee plans — net			67		(241)				(174)				(174)

Changes in noncontrolling interests											(7)		(7)
Equity - June 30, 2025	$	62,392	$	151,367	$	(170,209)	$	(16,041)	$	27,509	$	79	$	27,588


(Dollars in millions except per share amounts)	Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Total IBM Stockholders' Equity		Non- Controlling Interests		Total Equity
Equity - January 1, 2024	$	59,643	$	151,276	$	(169,624)	$	(18,761)	$	22,533	$	80	$	22,613
Net income plus other comprehensive income/(loss):
Net income			3,439						3,439				3,439
Other comprehensive income/(loss)							442		442				442
Total comprehensive income									$	3,882			$	3,882
Cash dividends paid — common stock ($3.33 per share)			(3,058)						(3,058)				(3,058)
Common stock issued under employee plans (6,810,086 shares)	858								858				858
Purchases (1,944,555 shares) and sales (1,269,017 shares) of treasury stock under employee plans — net			3		(191)				(188)				(188)

Changes in noncontrolling interests											(3)		(3)
Equity - June 30, 2024	$	60,501	$	151,659	$	(169,815)	$	(18,319)	$	24,026	$	77	$	24,103

(Amounts may not add due to rounding.)

(The accompanying notes are an integral part of the financial statements.)

Notes to Consolidated Financial Statements

1. Basis of Presentation:

The accompanying Consolidated Financial Statements and footnotes of the International Business Machines Corporation (IBM or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of the company’s management, these statements include all adjustments, which are only of a normal recurring nature, necessary to present a fair statement of the company’s results of operations, financial position and cash flows.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates.

In the first quarter of 2025, the company made changes to the reported revenue categories within its Software and Consulting reportable segments. These changes did not impact the company's Consolidated Financial Statements or its reportable segments. The revenue categories are reported on a comparable basis for all periods. Refer to note 3, “Revenue Recognition,” for additional information.

For the six months ended June 30, 2024, the company reported a benefit from income taxes of $112 million. The benefit from income taxes was primarily driven by the resolution of certain tax audit matters in the first quarter of 2024.

On July 4, 2025, H.R. 1, a bill to provide for reconciliation, was signed into law in the United States as Public Law 119-21 (the Act). The Act incorporates various business tax provisions, including the permanent extension of key measures from the 2017 Tax Cuts and Jobs Act. The effects of changes in tax legislation must be recognized in the period of enactment. The company is currently assessing the tax effects of the Act and expects to record a one-time, non-cash charge in the Consolidated Income Statement for the period ending September 30, 2025, primarily for the remeasurement of deferred tax assets and liabilities related to Global Intangible Low-Taxed Income (GILTI), now renamed to Net Controlled Foreign Corporation Tested Income (NCTI).

Noncontrolling interest amounts, included as a reduction within other (income) and expense in the Consolidated Income Statement, were not material to the consolidated results for the periods presented.

The company has supplier finance programs with third-party financial institutions where the company agrees to pay the financial institutions the stated amounts of invoices from participating suppliers on the originally invoiced maturity date, which have an average term of 90 to 120 days, consistent with the company's standard payment terms. The financial institutions offer earlier payment of the invoices at the sole discretion of the supplier for a discounted amount. The company does not provide secured legal assets or other forms of guarantees under the arrangements. The company is not a party to the arrangements between its suppliers and the financial institutions. These obligations are recognized as accounts payable in the Consolidated Balance Sheet. The obligations outstanding under these programs were immaterial at June 30, 2025 and December 31, 2024.

Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the company’s 2024 Annual Report.

Within the financial statements and 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 change in current-period presentation. This is annotated where applicable.

Notes to Consolidated Financial Statements — (continued)

2. Accounting Changes:

New Standards to be Implemented

Disaggregation of Income Statement Expenses

Standard/Description–Issuance date: November 2024. This guidance requires a new tabular disclosure of certain types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) that are included within commonly presented expense captions on the income statement. The guidance also requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Additionally, the guidance requires the disclosure of the total amount of selling expenses and an entity’s definition of selling expenses. The disclosures are required on an interim and annual basis.

Effective Date and Adoption Considerations–The guidance is effective for the company for annual reporting periods beginning in 2027, and for interim reporting periods beginning January 1, 2028. Early adoption is permitted. The company expects to adopt the guidance as of the effective date and to apply the guidance on a prospective basis.

Effect on Financial Statements or Other Significant Matters– The company continues to evaluate the need for any changes to systems, processes, data or controls to meet the additional disclosure requirements. As the guidance is a change to disclosures only, it will impact the Notes to the Consolidated Financial Statements but will not impact the consolidated financial results.

Income Tax Disclosures

Standard/Description–Issuance date: December 2023. This guidance requires disaggregated disclosure of the tax rate reconciliation into eight categories, with further disaggregation required for items greater than a specific threshold. Additionally, the guidance requires the disclosure of income taxes paid disaggregated by federal, state and foreign jurisdictions.

Effective Date and Adoption Considerations–The guidance is effective for annual reporting periods beginning in 2025 and early adoption is permitted. The company will adopt the guidance as of the effective date.

Effect on Financial Statements or Other Significant Matters–As the guidance is a change to disclosures only, it will impact the “Taxes” note within the company's annual financial statements but will not impact the consolidated financial results.

Standards Implemented

Segment Reporting Disclosures

Standard/Description–Issuance date: November 2023. This guidance requires the disclosure of significant segment expenses that are regularly provided to a company's chief operating decision maker and included within each reported measure of segment profit or loss. The company must also disclose “other segment items,” which is the difference between segment revenue less significant expenses for each reported measure of segment profit or loss, and a description of its composition. This guidance also requires certain segment annual disclosures to be provided on an interim basis.

Effective Date and Adoption Considerations–The guidance was effective for annual periods beginning in 2024, and for interim periods beginning January 1, 2025, and is required to be applied on a retrospective basis to all prior periods presented. Early adoption was permitted. The company adopted the guidance as of the effective date.

Effect on Financial Statements or Other Significant Matters–The guidance is a change to disclosures only, that impacted the “Segments” note within the company's quarterly and annual financial statements but did not have an impact on the consolidated financial results.

Notes to Consolidated Financial Statements — (continued)

3. Revenue Recognition:

Disaggregation of Revenue

In the first quarter of 2025, the company made changes to the reported revenue categories within its Software and Consulting reportable segments to better reflect the market opportunities and how IBM addresses them. Beginning January 1, 2025, the company reports revenue for Hybrid Cloud (Red Hat), Automation, Data and Transaction Processing within Software; and it no longer reports revenue for Hybrid Platform & Solutions. Within Consulting, the company reports revenue for Strategy and Technology and Intelligent Operations. These changes did not impact the company's Consolidated Financial Statements or its reportable segments.

The following tables provide details of revenue by major products/service offerings and revenue by geography.

Revenue by Major Products/Service Offerings


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024 (1)		2025		2024 (1)


Hybrid Cloud	$	1,796	$	1,547	$	3,483	$	3,057
Automation	1,883		1,620		3,467		3,012
Data	1,499		1,378		2,736		2,550
Transaction Processing	2,208		2,194		4,037		4,019
Total Software	$	7,387	$	6,739	$	13,722	$	12,637
Strategy and Technology	2,920		2,895		5,702		5,757
Intelligent Operations	2,395		2,284		4,680		4,608
Total Consulting	$	5,314	$	5,179	$	10,382	$	10,365
Hybrid Infrastructure	2,866		2,360		4,512		4,163
Infrastructure Support	1,275		1,285		2,515		2,558
Total Infrastructure	$	4,142	$	3,645	$	7,027	$	6,721
Financing (2)	166		169		357		362
Other (3)	(31)		38		30		146
Total revenue	$	16,977	$	15,770	$	31,519	$	30,231

(1)Prior-year amounts recast to reflect January 2025 changes to the reported revenue categories within Software and Consulting segments.

(2)Contains lease and loan financing arrangements which are not subject to the guidance on revenue from contracts with customers.

(3)Includes reductions in revenue for estimated residual value less related unearned income on sales-type leases, which reflects the new z17 launch in June 2025. Refer to note A, "Significant Accounting Policies," in the company's 2024 Annual Report for additional information.

Revenue by Geography




	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024		2025		2024
Americas	$	8,462	$	7,979	$	15,668	$	15,275
Europe/Middle East/Africa	5,413		4,722		9,965		9,035
Asia Pacific	3,103		3,069		5,886		5,922
Total	$	16,977	$	15,770	$	31,519	$	30,231

Remaining Performance Obligations

The remaining performance obligation (RPO) disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed, such as certain as-a-service, governmental, term software license and services offerings. The customer is not considered committed when they are able to terminate for

Notes to Consolidated Financial Statements — (continued)

convenience without payment of a substantive penalty. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property. Additionally, as a practical expedient, the company does not include contracts that have an original duration of one year or less. RPO estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.

At June 30, 2025, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was approximately $66 billion. Approximately 69 percent of the amount is expected to be recognized as revenue in the subsequent two years, approximately 27 percent in the subsequent three to five years and the balance thereafter.

Revenue Recognized for Performance Obligations Satisfied (or Partially Satisfied) in Prior Periods

For the three and six months ended June 30, 2025, revenue recognized for performance obligations satisfied or partially satisfied in prior periods was immaterial.

Reconciliation of Contract Balances

The following table provides information about notes and accounts receivable — trade, contract assets and deferred income balances.


(Dollars in millions)	At June 30, 2025		At December 31, 2024
Notes and accounts receivable — trade (net of allowances of $109 in 2025 and $114 in 2024)	$	5,974	$	6,804
Contract assets (1)	$	495	$	433
Deferred income (current)	$	15,022	$	13,907
Deferred income (noncurrent)	$	3,913	$	3,622

(1)Included within prepaid expenses and other current assets in the Consolidated Balance Sheet.

The amount of revenue recognized during the six months ended June 30, 2025 that was included within the deferred income balance at December 31, 2024 was $7.8 billion and was primarily related to software and services.

The following table provides roll forwards of the notes and accounts receivable–trade allowance for expected credit losses for the six months ended June 30, 2025 and the year ended December 31, 2024.


(Dollars in millions)
January 1, 2025	Additions / (Releases)	Write-offs (1)	Foreign currency and other	June 30, 2025
$114	$(2)	$(14)	$11	$109


January 1, 2024						Additions / (Releases)						Write-offs (1)						Foreign currency and other						December 31, 2024
$192						$(2)						$(78)						$2						$114

(1)The majority of the write-offs during the period related to receivables which had been previously reserved.

The contract assets allowance for expected credit losses was not material in any of the periods presented.

Notes to Consolidated Financial Statements — (continued)

4. Segments:

The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company. Performance measurement is based on segment profit. The chief operating decision maker (CODM) considers budget-to-actual results of segment profit, both when evaluating the performance of and allocating resources to each of the segments as well as in developing certain compensation recommendations. The CODM reviews segment revenue, cost and profit information related to each segment, which is included in the tables below, but does not regularly review total assets by segment and therefore, such information is not presented.

Management System Segment View


(Dollars in millions)	Software			Consulting			Infrastructure			Financing			Total Segments
For the three months ended June 30, 2025:
Revenue	$	7,387		$	5,314		$	4,142		$	166		$	17,009
Segment cost	1,190			3,854			1,593			90			6,727
Other expenses and (income) (1)	3,900			898			1,583			(103)			6,278
Segment profit	$	2,296		$	562		$	965		$	179		$	4,003
Revenue year-to-year change	9.6		%	2.6		%	13.6		%	(1.7)		%	8.1		%
Segment profit year-to-year change	8.7		%	21.3		%	47.6		%	134.2		%	21.1		%
Segment profit margin	31.1		%	10.6		%	23.3		%	107.9		%	23.5		%

For the three months ended June 30, 2024:
Revenue	$	6,739		$	5,179		$	3,645		$	169		$	15,732
Segment cost	1,105			3,816			1,585			86			6,592
Other expenses and (income) (1)	3,522			899			1,406			6			5,833
Segment profit	$	2,113		$	463		$	654		$	77		$	3,306
Segment profit margin	31.3		%	8.9		%	17.9		%	45.3		%	21.0		%

(1)Other expenses and (income) by segment primarily includes:

Software – Selling, general and administrative (SG&A) expense, Research and development (R&D) expense, Other income and expense

Consulting – SG&A expense

Infrastructure – SG&A expense, R&D expense, Other expense, Intellectual property and custom development income

Financing – Intercompany financing net other income which reflects IBM Z product cycle dynamics, SG&A expense

Notes to Consolidated Financial Statements — (continued)

Reconciliations to IBM as Reported:


(Dollars in millions)
For the three months ended June 30:	2025		2024
Revenue:
Total reportable segments	$	17,009	$	15,732
Other‒divested businesses	(1)		0
Other revenue (1)	(30)		38
Total revenue from continuing operations	$	16,977	$	15,770

Pre-tax income from continuing operations:
Total reportable segment profit	$	4,003	$	3,306
Amortization of acquired intangible assets	(549)		(439)
Acquisition-related charges (2)	(26)		(36)
Non-operating retirement-related (costs)/income	(25)		(98)

Stock-based compensation (3)	(424)		(316)
Net interest excluding the Financing segment	(343)		(218)
Workforce rebalancing charges (3)	(17)		(18)
Other‒divested businesses	(20)		(4)
Unallocated corporate amounts and other	(2)		41
Total pre-tax income from continuing operations	$	2,597	$	2,219

(1)Includes reductions in revenue for the estimated residual value less related unearned income on sales-type leases, which reflects the new z17 launch in June 2025. Refer to note A, “Significant Accounting Policies,” in the company’s 2024 Annual Report for additional information.

(2)2024 includes the impact of 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.

(3)Excludes certain acquisition-related charges.

Notes to Consolidated Financial Statements — (continued)

Management System Segment View


(Dollars in millions)	Software			Consulting			Infrastructure			Financing			Total Segments
For the six months ended June 30, 2025:
Revenue	$	13,722		$	10,382		$	7,027		$	357		$	31,489
Segment cost	2,232			7,540			2,957			194			12,923
Other expenses and (income) (1)	7,347			1,721			2,858			(84)			11,842
Segment profit	$	4,143		$	1,121		$	1,213		$	248		$	6,725
Revenue year-to-year change	8.6		%	0.2		%	4.6		%	(1.2)		%	4.7		%
Segment profit year-to-year change	14.7		%	26.2		%	25.7		%	47.1		%	19.4		%
Segment profit margin	30.2		%	10.8		%	17.3		%	69.3		%	21.4		%

For the six months ended June 30, 2024:
Revenue	$	12,637		$	10,365		$	6,721		$	362		$	30,085
Segment cost	2,144			7,689			2,995			186			13,013
Other expenses and (income) (1)	6,882			1,788			2,761			8			11,439
Segment profit	$	3,612		$	888		$	965		$	168		$	5,633
Segment profit margin	28.6		%	8.6		%	14.4		%	46.5		%	18.7		%

(1)Other expenses and (income) by segment primarily includes:

Software – SG&A expense, R&D expense, Other income

Consulting – SG&A expense

Infrastructure – R&D expense, SG&A expense, Other expense, Intellectual property and custom development income

Financing – Intercompany financing net other income which reflects IBM Z product cycle dynamics, SG&A expense

Notes to Consolidated Financial Statements — (continued)

Reconciliations to IBM as Reported:


(Dollars in millions)
For the six months ended June 30:	2025		2024
Revenue:
Total reportable segments	$	31,489	$	30,085
Other‒divested businesses	(1)		35
Other revenue (1)	31		111
Total revenue from continuing operations	$	31,519	$	30,231

Pre-tax income from continuing operations:
Total reportable segment profit	$	6,725	$	5,633
Amortization of acquired intangible assets	(1,044)		(866)
Acquisition-related charges (2)	(88)		(96)
Non-operating retirement-related (costs)/income	(48)		(194)
Stock-based compensation (3)	(825)		(636)
Net interest excluding the Financing segment	(608)		(442)
Workforce rebalancing charges (3)	(333)		(392)
Other‒divested businesses (4)	(28)		235
Unallocated corporate amounts and other	3		50
Total pre-tax income from continuing operations	$	3,755	$	3,293

(3)Excludes certain acquisition-related charges.

(4)2024 includes a gain from the divestiture of The Weather Company assets.

Notes to Consolidated Financial Statements — (continued)

Other Reportable Segment Items


(Dollars in millions)	Software		Consulting		Infrastructure		Financing		Total Segments
For the three months ended June 30, 2025:
Depreciation (1) /amortization of non-acquired intangibles	$	134	$	20	$	278	$	0	$	433
Interest Income	—		—		—		162		162
Interest Expense	—		—		—		84		84

For the three months ended June 30, 2024:
Depreciation (1) /amortization of non-acquired intangibles	$	135	$	26	$	269	$	3	$	432
Interest Income	—		—		—		163		163
Interest Expense	—		—		—		95		95


(Dollars in millions)	Software		Consulting		Infrastructure		Financing		Total Segments
For the six months ended June 30, 2025:
Depreciation (1) /amortization of non-acquired intangibles	$	255	$	40	$	544	$	2	$	842
Interest Income	—		—		—		338		338
Interest Expense	—		—		—		173		173

For the six months ended June 30, 2024:
Depreciation (1) /amortization of non-acquired intangibles	$	263	$	53	$	535	$	5	$	856
Interest Income	—		—		—		343		343
Interest Expense	—		—		—		197		197

(1)Where several segments share the use of leased or owned assets, a landlord's ownership of these assets is assigned to one segment. While depreciation expense is allocated to each user segment, it is presented consistently with the landlord's ownership; therefore, there will not be a precise correlation between segment profit and the segment depreciation reported above.

Immaterial Items

The resulting gains and (losses) from equity method investments that are attributable to the segments did not have a material effect on the financial results of the segments.

Notes to Consolidated Financial Statements — (continued)

5. Acquisitions & Divestitures:

Acquisitions

Purchase price consideration for all acquisitions was paid primarily in cash. All acquisitions, unless otherwise stated, were for 100 percent of the acquired business and are reported in the Consolidated Statement of Cash Flows, net of acquired cash and cash equivalents.

During the six months ended June 30, 2025, the company completed four acquisitions within the Software segment and two acquisitions within the Consulting segment at an aggregate total purchase price of $8,887 million. These acquisitions are expected to enhance the company’s portfolio of products and services capabilities and further advance IBM’s hybrid cloud and AI strategy.

At June 30, 2025, the remaining cash to be remitted by the company related to certain first-half 2025 acquisitions was $152 million, of which $63 million was classified as restricted cash in the Consolidated Balance Sheet. The remaining cash amount is primarily expected to be paid in 2026 and will be presented as financing activity in the Consolidated Statement of Cash Flows at settlement.

The following table reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of June 30, 2025.


(Dollars in millions)	Amortization Life (in years)	HashiCorp, Inc. (HashiCorp)		Other Acquisitions
Current assets (1)		$	1,451	$	151
Property, plant and equipment/noncurrent assets		457		104
Intangible assets:
Goodwill	N/A	4,675		945
Client relationships	5-13	980		295
Completed technology	5-7	770		193
Trademarks	1-7	85		6
Total assets acquired		$	8,418	$	1,694
Current liabilities		478		137
Noncurrent liabilities		507		104
Total liabilities assumed		$	985	$	241
Total purchase price		$	7,433	$	1,453

(1)Includes $929 million of cash and cash equivalents and $331 million of short-term marketable securities acquired from HashiCorp at the acquisition date.

N/A – not applicable

The goodwill generated from these acquisitions is primarily attributable to the assembled workforce and the expected synergies from the integration of the acquired businesses. The identified intangible assets are amortized on a straight-line basis over their useful life which approximates the economic life of the assets.

The valuation of the assets acquired and liabilities assumed is subject to revision. If additional information becomes available, the company may further revise the purchase price allocation as soon as practical, but no later than one year from the acquisition date.

Notes to Consolidated Financial Statements — (continued)

HashiCorp — On February 27, 2025, the company completed the acquisition of all of the outstanding shares of HashiCorp. The combined IBM and HashiCorp portfolios help clients manage growing application and infrastructure complexity and create a comprehensive end-to-end hybrid cloud platform designed for the AI era. HashiCorp's shareholders on record immediately prior to the effective time on the closing date received $35 per share in cash, representing a total equity value of approximately $7.2 billion. The following table reflects the consideration paid related to the acquisition.


(Dollars in millions)	Total Consideration (1)
Cash paid for outstanding HashiCorp common stock	$	7,212
Cash paid for HashiCorp equity awards	178
Cash consideration	$	7,390
Fair value of stock-based compensation awards attributable to pre-acquisition services	40
Settlement of pre-existing relationships	3
Total consideration	$	7,433

(1)As part of the assets acquired, the company received $929 million of cash and cash equivalents and $331 million of short-term marketable securities from HashiCorp.

Goodwill of $4,532 million and $143 million was assigned to the Software and Consulting segments, respectively. It is expected that none of the goodwill will be deductible for tax purposes. The overall weighted-average useful life of the identified amortizable intangible assets acquired was 9.8 years. In connection with the acquisition, the company issued and assumed 1.7 million stock awards with a fair value of $381 million. Refer to note 17, "Stock-Based Compensation," for additional information. The acquisition was integrated into the Software segment.

Other Acquisitions — Goodwill of $482 million and $463 million was assigned to the Consulting and Software segments, respectively. It is expected that 2 percent of the goodwill will be deductible for tax purposes. The overall weighted-average useful life of the identified amortizable intangible assets acquired was 6.6 years.

6. Other (Income) and Expense:

Components of other (income) and expense are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024		2025		2024


Other (income) and expense:
(Gains)/losses on foreign currency transactions (1)	$	773	$	(140)	$	1,215	$	(345)
(Gains)/losses on derivative instruments (1)	(601)		140		(1,043)		427
Interest income	(172)		(217)		(363)		(427)
Net (gains)/losses from securities and investment assets	(19)		0		10		(10)
Retirement-related costs/(income)	25		98		48		194
Other (2)	(45)		(114)		(71)		(389)
Total other (income) and expense	$	(39)	$	(233)	$	(204)	$	(550)

(1)The company uses financial hedging instruments to limit specific currency risks related to foreign currency-based transactions. The hedging program does not hedge 100 percent of currency exposures and defers, versus eliminates, the impact of currency. Refer to note 16, “Derivative Financial Instruments,” for additional information on foreign exchange risk.

(2)For the six months ended June 30, 2024, the company recognized a pre-tax gain of $239 million from the divestiture of The Weather Company assets.

Notes to Consolidated Financial Statements — (continued)

7. Earnings Per Share of Common Stock:

The following tables provide the computation of basic and diluted earnings per share of common stock for the three and six months ended June 30, 2025 and 2024.


(Dollars in millions except per share amounts)
For the three months ended June 30:	2025		2024
Number of shares on which basic earnings per share is calculated:
Weighted-average shares outstanding during period	930,807,276		920,287,541
Add — Incremental shares under stock-based compensation plans	14,690,010		11,883,820
Add — Incremental shares associated with contingently issuable shares	2,464,631		2,226,234
Number of shares on which diluted earnings per share is calculated	947,961,917		934,397,595

Income from continuing operations	$	2,193	$	1,830
Income from discontinued operations, net of tax	1		4
Net income on which basic and dilutive earnings per share is calculated	$	2,194	$	1,834

Earnings per share of common stock:
Assuming dilution
Continuing operations	$	2.31	$	1.96
Discontinued operations	0.00		0.00
Total	$	2.31	$	1.96
Basic
Continuing operations	$	2.36	$	1.99
Discontinued operations	0.00		0.00
Total	$	2.36	$	1.99

Stock options to purchase 1,852,037 shares and 2,985,594 shares were outstanding as of June 30, 2025 and 2024, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options during the respective period was greater than the average market price of the common shares, and therefore, the effect would have been antidilutive.

Notes to Consolidated Financial Statements — (continued)


(Dollars in millions except per share amounts)
For the six months ended June 30:	2025		2024
Number of shares on which basic earnings per share is calculated:
Weighted-average shares outstanding during period	929,407,000		918,733,160
Add — Incremental shares under stock-based compensation plans	14,955,436		13,070,105
Add — Incremental shares associated with contingently issuable shares	2,302,637		2,111,189
Number of shares on which diluted earnings per share is calculated	946,665,073		933,914,454

Income from continuing operations	$	3,248	$	3,405
Income/(loss) from discontinued operations, net of tax	1		34
Net income on which basic and dilutive earnings per share is calculated	$	3,249	$	3,439

Earnings/(loss) per share of common stock:
Assuming dilution
Continuing operations	$	3.43	$	3.65
Discontinued operations	0.00		0.04
Total	$	3.43	$	3.68
Basic
Continuing operations	$	3.49	$	3.71
Discontinued operations	0.00		0.04
Total	$	3.50	$	3.74

Stock options to purchase 1,855,810 shares and 1,523,477 shares (average of first and second quarter share amounts) were outstanding as of June 30, 2025 and 2024, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options during the respective period was greater than the average market price of the common shares, and therefore, the effect would have been antidilutive.

8. Financial Assets & Liabilities:

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The company classifies certain assets and liabilities based on the following fair value hierarchy:

Level 1–Quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date;
Level 2–Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3–Unobservable inputs for the asset or liability.

Notes to Consolidated Financial Statements — (continued)

When available, the company uses unadjusted quoted market prices in active markets to measure the fair value and classifies such items as Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation.

The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. For derivatives and debt securities, the company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument.

In determining the fair value of financial instruments, the company considers certain market valuation adjustments to the “base valuations” calculated using the methodologies described below for several parameters that market participants would consider in determining fair value:

Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument.
Credit risk adjustments are applied to reflect the company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the company’s own credit risk as observed in the credit default swap market.

The company holds investments primarily in time deposits, certificates of deposit, and U.S. government debt that are designated as available-for-sale. The primary objective of the company’s cash and debt investment portfolio is to protect principal by investing in very liquid investment securities with highly rated counterparties.

Available-for-sale securities are measured for impairment on a recurring basis by comparing the security’s fair value with its amortized cost basis. If the fair value of the security falls below its amortized cost basis, the change in fair value is recognized in the period the impairment is identified when the loss is due to credit factors. The change in fair value due to non-credit factors is recorded in other comprehensive income when the company does not intend to sell and has the ability to hold the investment. The company’s standard practice is to hold all of its debt security investments classified as available-for-sale until maturity. No impairments for credit losses and no material non-credit impairments were recorded for the three and six months ended June 30, 2025 and 2024, respectively.

Certain non-financial assets such as property, plant and equipment, operating right-of-use assets, goodwill and intangible assets are also subject to nonrecurring fair value measurements if they are deemed to be impaired. The impairment models used for non-financial assets depend on the type of asset. There were no material impairments of non-financial assets for the three and six months ended June 30, 2025 and 2024, respectively.

Notes to Consolidated Financial Statements — (continued)

The following table presents the company’s financial assets and financial liabilities that are measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024.


	Fair Value Hierarchy Level		At June 30, 2025						At December 31, 2024
(Dollars in millions)		Assets (5)			Liabilities (6)			Assets (5)			Liabilities (6)
Cash equivalents: (1)
Time deposits, certificates of deposit and other (2)	2		$	6,652		N/A			$	6,663		N/A
Money market funds	1		564			N/A			284			N/A
Total cash equivalents			$	7,216		N/A			$	6,948		N/A
Equity investments	1		—			N/A			—			N/A
Debt securities-current (2) (3)	2		3,504			N/A			644			N/A
Debt securities-noncurrent (2) (4)	2,3		4			N/A			124			N/A
Derivatives designated as hedging instruments:
Interest rate contracts	2		1			214			—			362
Foreign exchange contracts	2		500			591			645			294
Derivatives not designated as hedging instruments:
Foreign exchange contracts	2		51			15			22			43
Equity contracts	2		116			0			4			27
Total			$	11,391		$	820		$	8,386		$	726

(1)Included within cash and cash equivalents in the Consolidated Balance Sheet.

(2)Available-for-sale debt securities with carrying values that approximate fair value.

(3)Term deposits and government securities that are reported within marketable securities in the Consolidated Balance Sheet.

(4)December 31, 2024 balance includes a seller financing loan of approximately $100 million in connection with the divestiture of The Weather Company assets that was repaid early by the debtor in the second quarter of 2025, reported within investments and sundry assets in the Consolidated Balance Sheet.

(5)The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Balance Sheet at June 30, 2025 were $329 million and $338 million, respectively, and at December 31, 2024 were $575 million and $96 million, respectively.

(6)The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Balance Sheet at June 30, 2025 were $559 million and $262 million, respectively, and at December 31, 2024 were $262 million and $463 million, respectively.

N/A – not applicable

Financial Assets and Liabilities Not Measured at Fair Value

Short-Term Receivables and Payables

Short-term receivables (excluding the current portion of long-term receivables) and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt (excluding the current portion of long-term debt) are financial liabilities with carrying values that approximate fair value. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy, except for short-term debt which would be classified as Level 2.

Loans and Long-Term Receivables

Fair values are based on discounted future cash flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remaining maturities. At June 30, 2025 and December 31, 2024, the difference between the carrying amount and estimated fair value for loans and long-term receivables was immaterial. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy.

Notes to Consolidated Financial Statements — (continued)

Long-Term Debt

Fair value of publicly traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt (including long-term finance lease liabilities) for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. The carrying amount of long-term debt was $55,219 million and $49,884 million, and the estimated fair value was $52,968 million and $47,389 million at June 30, 2025 and December 31, 2024, respectively. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy.

9. Financing Receivables:

Financing receivables primarily consist of client loan and installment payment receivables (loans), investment in sales-type and direct financing leases (collectively referred to as client financing receivables) and commercial financing receivables. Loans are provided primarily to clients to finance the purchase of IBM hardware, software and services. Payment terms on these financing arrangements are for terms generally up to seven years. Investment in sales-type and direct financing leases relate principally to the company’s Infrastructure products and are for terms generally up to five years. Commercial financing receivables, which consist of both held-for-investment and held-for-sale receivables, relate primarily to working capital financing for business partners and distributors of IBM products and services. Payment terms for working capital financing generally range from 30 to 60 days.

A summary of the components of the company’s financing receivables is presented as follows:


	Client Financing Receivables
	Client Loan and Installment Payment Receivables		Investment in Sales-Type and Direct Financing
			Commercial Financing Receivables
(Dollars in millions)			Held for		Held for
At June 30, 2025	(Loans)		Leases		Investment		Sale (1)		Total
Financing receivables, gross	$	8,060	$	3,769	$	541	$	746	$	13,116
Unearned income	(645)		(401)		—		—		(1,045)
Unguaranteed residual value	—		574		—		—		574
Amortized cost	$	7,415	$	3,942	$	541	$	746	$	12,644
Allowance for credit losses	(69)		(67)		(5)		—		(141)
Total financing receivables, net	$	7,346	$	3,875	$	536	$	746	$	12,503
Current portion	$	3,561	$	1,489	$	536	$	746	$	6,333
Noncurrent portion	$	3,785	$	2,386	$	—	$	—	$	6,171


	Client Financing Receivables
	Client Loan and Installment Payment Receivables		Investment in Sales-Type and Direct Financing
			Commercial Financing Receivables
(Dollars in millions)			Held for		Held for
At December 31, 2024	(Loans)		Leases		Investment		Sale (1)		Total
Financing receivables, gross	$	7,425	$	3,406	$	1,322	$	900	$	13,052
Unearned income	(547)		(344)		—		—		(891)
Unguaranteed residual value	—		479		—		—		479
Amortized cost	$	6,878	$	3,540	$	1,322	$	900	$	12,639
Allowance for credit losses	(73)		(50)		(5)		—		(128)
Total financing receivables, net	$	6,804	$	3,491	$	1,317	$	900	$	12,512
Current portion	$	3,535	$	1,408	$	1,317	$	900	$	7,159
Noncurrent portion	$	3,269	$	2,083	$	—	$	—	$	5,353

(1)The carrying value of the receivables classified as held for sale approximates fair value.

Notes to Consolidated Financial Statements — (continued)

The company has a long-standing practice of taking mitigation actions, in certain circumstances, to transfer credit risk to third parties. These actions may include credit insurance, financial guarantees, nonrecourse secured borrowings, true sales, or sales of equipment under operating lease. Sale of receivables arrangements are also utilized in the normal course of business as part of the company’s cash and liquidity management.

Financing receivables pledged as collateral for secured borrowings were $166 million and $213 million at June 30, 2025 and December 31, 2024, respectively. These borrowings are included in note 12, “Borrowings.”

Transfer of Financial Assets

Effective January 1, 2025, the company extended its existing agreement for a 26-month term with a third-party investor to sell up to $1.3 billion of IBM short-term commercial financing receivables on a revolving basis. In addition, the company enters into agreements with third-party financial institutions to sell certain of its client financing receivables, including both loan and lease receivables, for cash proceeds. There were no material client financing receivables transferred for the six months ended June 30, 2025 and 2024.

The following table presents the total amount of commercial financing receivables transferred.


(Dollars in millions)
For the six months ended June 30:	2025		2024




Commercial financing receivables:
Receivables transferred during the period	$	3,715	$	3,686
Receivables uncollected at end of period (1)	$	686	$	786

(1)Of the total amount of commercial financing receivables sold and derecognized from the Consolidated Balance Sheet, the amounts presented remained uncollected from business partners as of June 30, 2025 and 2024.

The transfer of these receivables qualified as true sales and therefore reduced financing receivables. The cash proceeds from the sales are included in cash flows from operating activities. For the six months ended June 30, 2025 and 2024, the net loss, including fees, associated with the transfer of commercial financing receivables was $25 million and $33 million, respectively, and is included in other (income) and expense in the Consolidated Income Statement. For the company’s policy on determining treatment for transfer of financial assets, refer to note A, “Significant Accounting Policies,” in the company’s 2024 Annual Report.

Financing Receivables by Portfolio Segment

The following tables present the amortized cost basis for client financing receivables at June 30, 2025 and December 31, 2024, further segmented by three classes: Americas, Europe/Middle East/Africa (EMEA) and Asia Pacific. The commercial financing receivables portfolio segment is excluded from the tables in the sections below as the receivables are short term in nature and the current estimated risk of loss and resulting impact to the company’s financial results are not material.


(Dollars in millions)
At June 30, 2025:	Americas		EMEA		Asia Pacific		Total
Amortized cost	$	6,293	$	3,515	$	1,549	$	11,357
Allowance for credit losses:
Beginning balance at January 1, 2025	$	69	$	45	$	9	$	123
Write-offs	$	(14)	$	0	$	0	$	(14)
Recoveries	0		0		0		0
Additions/(releases)	9		5		2		16
Other (1)	5		6		0		11
Ending balance at June 30, 2025	$	69	$	56	$	11	$	136

(1)Primarily represents translation adjustments.

Notes to Consolidated Financial Statements — (continued)


(Dollars in millions)
At December 31, 2024:	Americas		EMEA		Asia Pacific		Total
Amortized cost	$	5,861	$	3,128	$	1,429	$	10,418
Allowance for credit losses:
Beginning balance at January 1, 2024	$	92	$	48	$	11	$	150
Write-offs	$	(2)	$	(1)	$	0	$	(3)
Recoveries	1		0		0		1
Additions/(releases)	(10)		0		(2)		(12)
Other (1)	(11)		(2)		0		(14)
Ending balance at December 31, 2024	$	69	$	45	$	9	$	123

(1)Primarily represents translation adjustments.

When determining the allowances, financing receivables are evaluated either on an individual or a collective basis. For the company’s policy on determining allowances for credit losses, refer to note A, “Significant Accounting Policies,” in the company’s 2024 Annual Report.

Past Due Financing Receivables

The company summarizes information about the amortized cost basis for client financing receivables, including amortized cost aged over 90 days and still accruing, billed invoices aged over 90 days and still accruing, and amortized cost not accruing.


(Dollars in millions)	Total Amortized Cost		Amortized Cost > 90 Days (1)		Amortized Cost > 90 Days and Accruing (1)		Billed Invoices > 90 Days and Accruing		Amortized Cost Not Accruing (2)
At June 30, 2025:
Americas	$	6,293	$	56	$	8	$	1	$	50
EMEA	3,515		32		1		0		32
Asia Pacific	1,549		10		3		0		7
Total client financing receivables	$	11,357	$	99	$	12	$	2	$	90


(Dollars in millions)	Total Amortized Cost		Amortized Cost > 90 Days (1)		Amortized Cost > 90 Days and Accruing (1)		Billed Invoices > 90 Days and Accruing		Amortized Cost Not Accruing (2)
At December 31, 2024:
Americas	$	5,861	$	66	$	7	$	1	$	62
EMEA	3,128		29		1		0		28
Asia Pacific	1,429		8		0		0		7
Total client financing receivables	$	10,418	$	103	$	8	$	1	$	97

(1)At a contract level, which includes total billed and unbilled amounts for financing receivables aged greater than 90 days.

(2)Of the amortized cost not accruing, there was a related allowance of $88 million and $94 million at June 30, 2025 and December 31, 2024, respectively. Financing income recognized on these receivables was immaterial for the three and six months ended June 30, 2025 and 2024, respectively.

Credit Quality Indicators

The company’s credit quality indicators, which are based on rating agency data, publicly available information and information provided by customers, are reviewed periodically based on the relative level of risk. The resulting indicators are a numerical rating system that maps to Moody’s Investors Service credit ratings as shown below. The company uses information provided by Moody’s, where available, as one of many inputs in its determination of customer credit ratings. The credit quality of the customer is evaluated based on these indicators and is assigned the same risk rating whether the receivable is a lease or a loan.

Notes to Consolidated Financial Statements — (continued)

The following tables present the amortized cost basis for client financing receivables by credit quality indicator at June 30, 2025 and December 31, 2024, respectively. Receivables with a credit quality indicator ranging from Aaa to Baa3 are considered investment grade. All others are considered non-investment grade. The credit quality indicators reflect mitigating credit enhancement actions taken by customers which reduce the risk to IBM. Gross write-offs by vintage year at June 30, 2025 and December 31, 2024 were not material.


(Dollars in millions)	Americas				EMEA				Asia Pacific
At June 30, 2025:	Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C
Vintage year:
2025	$	2,058	$	251	$	774	$	208	$	385	$	64
2024	1,545		332		944		461		469		57
2023	926		297		295		216		252		14
2022	587		68		302		130		191		21
2021	127		11		83		16		49		3
2020 and prior	40		50		42		46		31		14
Total	$	5,282	$	1,010	$	2,439	$	1,076	$	1,377	$	172


(Dollars in millions)	Americas				EMEA				Asia Pacific
At December 31, 2024:	Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C		Aaa – Baa3		Ba1 – C
Vintage year:
2024	$	2,080	$	621	$	1,145	$	514	$	616	$	77
2023	1,372		310		341		258		285		19
2022	950		113		408		194		254		26
2021	233		24		125		27		69		5
2020	43		17		29		15		36		8
2019 and prior	53		44		37		35		26		7
Total	$	4,732	$	1,129	$	2,085	$	1,043	$	1,287	$	142

Modifications

The company did not have any significant modifications due to clients experiencing financial difficulty during the six months ended June 30, 2025 or for the year ended December 31, 2024.

10. Leases:

Accounting for Leases as a Lessor

The following table presents amounts included in the Consolidated Income Statement related to lessor activity.


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024		2025		2024


Lease income — sales-type and direct financing leases:
Sales-type lease selling price	$	877	$	367	$	947	$	480
Less: Carrying value of underlying assets (1)	(152)		(66)		(182)		(94)
Gross profit	$	725	$	301	$	765	$	386
Interest income on lease receivables	54		69		115		138
Total sales-type and direct financing lease income	$	779	$	370	$	881	$	524
Lease income — operating leases	11		16		21		34
Variable lease income	16		18		28		38
Total lease income	$	806	$	404	$	930	$	596

(1)Excludes unguaranteed residual value.

Notes to Consolidated Financial Statements — (continued)

11. Intangible Assets Including Goodwill:

Intangible Assets

The following tables present the company's intangible asset balances by major asset class.


	At June 30, 2025
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount (1)
Intangible asset class:
Capitalized software	$	1,290	$	(405)	$	885
Client relationships	11,221		(5,073)		6,148
Completed technology	7,364		(3,642)		3,722
Patents/trademarks	2,003		(603)		1,399
Other (2)	138		(39)		99
Total	$	22,016	$	(9,763)	$	12,253


	At December 31, 2024
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount (1)
Intangible asset class:
Capitalized software	$	1,282	$	(492)	$	790
Client relationships	9,704		(4,387)		5,317
Completed technology	6,297		(3,164)		3,132
Patents/trademarks	1,826		(519)		1,307
Other (2)	138		(24)		114
Total	$	19,247	$	(8,587)	$	10,660

(1)Amounts at June 30, 2025 and December 31, 2024 include an increase in the net intangible asset balance of $190 million and a decrease in the net intangible asset balance of $126 million, respectively, due to foreign currency translation.

(2)Other intangibles are primarily acquired proprietary and non-proprietary technology licenses, data, business processes, methodologies and systems.

The net carrying amount of intangible assets increased $1,593 million during the first six months of 2025, primarily due to additions of acquired intangibles from business combinations of $2,329 million, primarily driven by the acquisition of HashiCorp in the first quarter of 2025 and additions of capitalized software, partially offset by intangible asset amortization. The aggregate intangible asset amortization expense was $687 million and $1,328 million for the three and six months ended June 30, 2025 and $607 million and $1,205 million for the three and six months ended June 30, 2024, respectively. During the six months ended June 30, 2025, the company retired $392 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount.

The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at June 30, 2025:


(Dollars in millions)	Capitalized Software		Acquired Intangibles		Total
Remainder of 2025	$	246	$	1,146	$	1,392
2026	377		2,246		2,623
2027	219		2,203		2,423
2028	43		1,898		1,941
2029	0		1,231		1,231
Thereafter	—		2,643		2,643

Notes to Consolidated Financial Statements — (continued)

Goodwill

The changes in the goodwill balances by segment for the six months ended June 30, 2025 and for the year ended December 31, 2024 were as follows:


(Dollars in millions)	Balance		Goodwill Additions		Purchase Price Adjustments					Foreign Currency Translation and Other Adjustments (1)		Balance
Segment	1/1/2025				Divestitures				6/30/2025
Software	$	47,136	$	4,994	$	12	$	—		$	912	$	53,054
Consulting	9,206		613		11		—			230		10,059
Infrastructure	4,363		—		0		0			31		4,393
Other	—		—		—		—			—		—
Total	$	60,706	$	5,607	$	22	$	0		$	1,172	$	67,506


(Dollars in millions)	Balance		Goodwill Additions		Purchase Price Adjustments					Foreign Currency Translation and Other Adjustments (1)		Balance
Segment	1/1/2024				Divestitures				12/31/2024
Software	$	46,447	$	1,511	$	(51)	$	—		$	(770)	$	47,136
Consulting	8,883		469		(3)		(1)			(142)		9,206
Infrastructure	4,384		8		(1)		—			(28)		4,363
Other (2)	464		—		—		(464)			—		—
Total	$	60,178	$	1,987	$	(55)	$	(465)		$	(940)	$	60,706

(1)Primarily driven by foreign currency translation.

(2)In the first quarter of 2024, the company derecognized goodwill related to the divestiture of The Weather Company assets.

Goodwill additions recorded in the six months ended June 30, 2025 were primarily driven by the acquisition of HashiCorp. Refer to note 5, “Acquisitions & Divestitures,” for additional information.

There were no goodwill impairment losses recorded during the six months ended June 30, 2025 or the year ended December 31, 2024 and the company has no accumulated impairment losses. Purchase price adjustments recorded during the six months ended June 30, 2025 and the year ended December 31, 2024 were related to acquisitions that were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. Net purchase price adjustments recorded in the six months ended June 30, 2025 and the year ended December 31, 2024 were not material.

12. Borrowings:

Short-Term Debt

The company's total short-term debt at June 30, 2025 and December 31, 2024 was $8,945 million and $5,089 million, respectively, and primarily consisted of current maturities of long-term debt detailed in “Long-Term Debt” below.

Notes to Consolidated Financial Statements — (continued)

Long-Term Debt

Pre-Swap Borrowing


		Balance		Balance
(Dollars in millions)	Maturities	6/30/2025		12/31/2024
U.S. dollar debt (weighted-average interest rate at June 30, 2025): (1)
5.1%	2025	$	1,600	$	1,601
3.7%	2026	5,800		5,800
3.3%	2027	4,119		4,119
4.8%	2028	2,320		1,313
3.6%	2029	3,752		3,750
3.2%	2030	2,355		1,350
4.8%	2031	500		500
4.6%	2032	2,700		1,850
4.8%	2033	750		750
4.9%	2034	1,000		1,000
5.2%	2035	900		—
8.0%	2038	83		83
4.5%	2039	2,745		2,745
2.9%	2040	650		650
4.0%	2042	1,107		1,107
5.3%	2044	1,000		1,000
7.0%	2045	27		27
4.7%	2046	650		650
4.3%	2049	3,000		3,000
3.0%	2050	750		750
4.2%	2052	1,400		1,400
5.1%	2053	650		650
5.3%	2054	1,400		1,400
5.7%	2055	1,000		—
7.1%	2096	316		316
		$	40,576	$	35,813
Euro debt (weighted-average interest rate at June 30, 2025): (1)
2.9%	2025	$	1,174	$	3,106
2.3%	2027	2,348		2,071
0.7%	2028	2,113		1,863
1.5%	2029	1,174		1,035
1.7%	2030	2,054		1,035
2.7%	2031	2,935		2,588
0.7%	2032	1,878		1,656
3.2%	2033	1,291		—
1.3%	2034	1,174		1,035
3.8%	2035	1,174		1,035
3.5%	2037	1,056		—
1.2%	2040	998		880
4.0%	2043	1,174		1,035
3.8%	2045	880		—
		$	21,422	$	17,340
Other currencies (weighted-average interest rate at June 30, 2025): (1)
Pound sterling (4.9%)	2038	$	1,027	$	939
Japanese yen (0.9%)	2026–2028	880		808
Other (13.8%)	2025–2027	158		212
		$	64,063	$	55,111
Finance lease obligations (4.8% weighted-average interest rate at June 30, 2025)	2025–2035	1,180		1,000
		$	65,242	$	56,112
Less: net unamortized discount		825		824
Less: net unamortized debt issuance costs		197		168
Add: fair value adjustment (2)		(57)		(176)
		$	64,164	$	54,943
Less: current maturities		8,944		5,059
Total		$	55,219	$	49,884

(1)Includes notes, debentures, bank loans and secured borrowings.

(2)The portion of the company’s fixed-rate debt obligations that is hedged is reflected in the Consolidated Balance Sheet as an amount equal to the sum of the debt’s carrying value and a fair value adjustment representing changes in the fair value of the hedged debt obligations attributable to movements in benchmark interest rates.

Notes to Consolidated Financial Statements — (continued)

The company’s indenture governing its debt securities and its various credit facilities each contain significant covenants which obligate the company to promptly pay principal and interest, limit the aggregate amount of secured indebtedness and sale and leaseback transactions to 10 percent of the company’s consolidated net tangible assets, and restrict the company’s ability to merge or consolidate unless certain conditions are met. The credit facilities also include a covenant on the company’s consolidated net interest expense ratio, which cannot be less than 2.20 to 1.0, as well as a cross default provision with respect to other defaulted indebtedness of at least $500 million.

The company is in compliance with its debt covenants and provides periodic certifications to its lenders. The failure to comply with its debt covenants could constitute an event of default with respect to the debt to which such provisions apply. If certain events of default were to occur, the principal and interest on the debt to which such event of default applied would become immediately due and payable.

In the first quarter of 2024, IBM International Capital Pte. Ltd (IIC), a wholly owned finance subsidiary of the company, issued $5.5 billion of U.S. dollar fixed-rate notes (IIC Notes) in tranches with maturities ranging from 2 to 30 years and coupons ranging from 4.6 to 5.3 percent. IIC is a 100 percent owned finance subsidiary of IBM, as described by the SEC in Rule 13-01(a)(4)(vi) of Regulation S-X, the primary purpose of which is to borrow money to be made available for the benefit of IBM and its affiliates. The IIC Notes are fully and unconditionally guaranteed by IBM, and no other subsidiary of IBM guarantees the IIC Notes.

On February 10, 2025, the company issued $3.6 billion of Euro fixed-rate notes in tranches with maturities ranging from 5 to 20 years and coupons ranging from 2.9 to 3.8 percent; and $4.75 billion of U.S. dollar fixed-rate notes in tranches with maturities ranging from 3 to 30 years and coupons ranging from 4.65 to 5.7 percent.

Pre-swap annual contractual obligations of long-term debt outstanding at June 30, 2025, were as follows:


(Dollars in millions)	Total
Remainder of 2025	$	2,968
2026	6,431
2027	6,732
2028	5,200
2029	5,083
Thereafter	38,828
Total	$	65,242

Interest on Debt


(Dollars in millions)
For the six months ended June 30:	2025		2024
Cost of financing	$	173	$	167
Interest expense	965		859
Interest capitalized	4		6
Total interest paid and accrued	$	1,141	$	1,032

Lines of Credit

On June, 20, 2025, the company amended its $2.5 billion Three-Year Credit Agreement and $7.5 billion Five-Year Credit Agreement (the Credit Agreements) to extend the maturity dates to June 20, 2028 and June 22, 2030, respectively. The Credit Agreements permit the company and its subsidiary borrowers to borrow up to $10 billion on a revolving basis. At June 30, 2025, there were no borrowings by the company, or its subsidiaries, under these credit facilities.

Notes to Consolidated Financial Statements — (continued)

13. Commitments:

The company’s extended lines of credit to third-party entities include unused amounts of $2.0 billion and $1.6 billion at June 30, 2025 and December 31, 2024, respectively. In addition, the company has committed to provide future financing to its clients in connection with client purchase agreements for $2.1 billion and $2.2 billion at June 30, 2025 and December 31, 2024, respectively. The company collectively evaluates the allowance for these arrangements using a provision methodology consistent with the portfolio of the commitments. Refer to note A, “Significant Accounting Policies,” in the company’s 2024 Annual Report for additional information. The allowance for these commitments recorded in other liabilities in the Consolidated Balance Sheet at June 30, 2025 and December 31, 2024 was not material.

The company has applied the guidance requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantor’s performance is remote. The following is a description of arrangements in which the company is the guarantor.

The company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by the company, under which the company customarily agrees to hold the party harmless against losses arising from a breach of representations and covenants related to such matters as title to the assets sold, certain intellectual property rights, specified environmental matters, third-party performance of nonfinancial contractual obligations and certain income taxes. In each of these circumstances, payment by the company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, the procedures of which typically allow the company to challenge the other party’s claims. While indemnification provisions typically do not include a contractual maximum on the company’s payment, the company’s obligations under these agreements may be limited in terms of time and/or nature of claim, and in some instances, the company may have recourse against third parties for certain payments made by the company.

It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the company under these agreements have not had a material effect on the company’s business, financial condition or results of operations.

In addition, the company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees and the fair value of these guarantees recognized in the Consolidated Balance Sheet at June 30, 2025 and December 31, 2024 were not material.

Changes in the company’s warranty liability for standard warranties, which are included in other accrued expenses and liabilities and other liabilities in the Consolidated Balance Sheet, are presented in the following table. The company's extended warranty liability, which is included in deferred income in the Consolidated Balance Sheet, was not material for the periods presented.

Standard Warranty Liability


(Dollars in millions)	2025		2024
Balance at January 1	$	76	$	65
Current-period accruals	34		38
Accrual adjustments to reflect actual experience	15		7
Charges incurred	(40)		(41)
Balance at June 30	$	85	$	70

Notes to Consolidated Financial Statements — (continued)

14. Contingencies:

As a company with a substantial employee population and with clients in more than 175 countries, IBM is involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. The company is a leader in the information technology industry and, as such, has been and will continue to be subject to claims challenging its IP rights and associated products and offerings, including claims of copyright and patent infringement and violations of trade secrets and other IP rights. In addition, the company enforces its own IP against infringement, through license negotiations, lawsuits or otherwise. Further, given the rapidly evolving external landscape of cybersecurity, AI, privacy and data protection laws, regulations and threat actors, the company and its clients have been and will continue to be subject to actions or proceedings in various jurisdictions. Also, as is typical for companies of IBM’s scope and scale, the company is party to actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employment decisions, country-specific labor and employment laws, and the company’s pension, retirement and other benefit plans), as well as actions with respect to contracts, product liability, cybersecurity, data privacy, securities, foreign operations, competition law and environmental matters. These actions may be commenced by a number of different parties, including competitors, clients, current or former employees, government and regulatory agencies, stockholders and representatives of the locations in which the company does business. Some of the actions to which the company is party may involve particularly complex technical issues, and some actions may raise novel questions under the laws of the various jurisdictions in which these matters arise.

The company records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Any recorded liabilities, including any changes to such liabilities for the quarter ended June 30, 2025 were not material to the Consolidated Financial Statements.

In accordance with the relevant accounting guidance, the company provides disclosures of matters for which the likelihood of material loss is at least reasonably possible. In addition, the company also discloses matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer and employee relations considerations.

With respect to certain of the claims, suits, investigations and proceedings discussed herein, the company believes at this time that the likelihood of any material loss is remote, given, for example, the procedural status, court rulings, and/or the strength of the company’s defenses in those matters. With respect to the remaining claims, suits, investigations and proceedings discussed in this note, except as specifically discussed herein, the company is unable to provide estimates of reasonably possible losses or range of losses, including losses in excess of amounts accrued, if any, for the following reasons. Claims, suits, investigations and proceedings are inherently uncertain, and it is not possible to predict the ultimate outcome of these matters. It is the company’s experience that damage amounts claimed in litigation against it are unreliable and unrelated to possible outcomes, and as such are not meaningful indicators of the company’s potential liability. Further, the company is unable to provide such an estimate due to a number of other factors with respect to these claims, suits, investigations and proceedings, including considerations of the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters.

The company reviews claims, suits, investigations and proceedings at least quarterly, and decisions are made with respect to recording or adjusting provisions and disclosing reasonably possible losses or range of losses (individually or in the aggregate), to reflect the impact and status of settlement discussions, discovery, procedural and substantive rulings, reviews by counsel and other information pertinent to a particular matter.

Whether any losses, damages or remedies finally determined in any claim, suit, investigation or proceeding could reasonably have a material effect on the company’s business, financial condition, results of operations or cash flows will depend on a number of variables, including: the timing and amount of such losses or damages; the structure and type of any such remedies; the significance of the impact any such losses, damages or remedies may have in the Consolidated Financial Statements; and the unique facts and circumstances of the particular matter that may give rise to additional factors. While the company will continue to defend itself vigorously, it is possible that the company’s business, financial condition, results of operations or cash flows could be affected in any particular period by the resolution of one or more of these matters.

Notes to Consolidated Financial Statements — (continued)

The following is a summary of the more significant legal matters involving the company.

On June 2, 2022, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York alleging that the IBM Pension Plan miscalculated certain joint and survivor annuity pension benefits by using outdated actuarial tables in violation of the Employee Retirement Income Security Act of 1974. IBM, the Plan Administrator Committee, and the IBM Pension Plan are named as defendants. On April 4, 2024, the court dismissed the lawsuit with prejudice. On April 3, 2025, the Second Circuit vacated and remanded the district court’s decision to allow for discovery on statute of limitations.

The company is party to, or otherwise involved in, proceedings brought by U.S. federal or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), known as “Superfund,” or laws similar to CERCLA. Such statutes require potentially responsible parties to participate in remediation activities regardless of fault or ownership of sites. The company is also conducting environmental investigations, assessments or remediations at or in the vicinity of several current or former operating sites globally pursuant to permits, administrative orders or agreements with country, state or local environmental agencies, and is involved in lawsuits and claims concerning certain current or former operating sites.

The company is also subject to ongoing tax examinations and governmental assessments in various jurisdictions. Along with many other U.S. companies doing business in Brazil, the company is involved in various challenges with Brazilian tax authorities regarding non-income tax assessments and non-income tax litigation matters. The total potential amount related to all these matters for all applicable years is approximately $350 million. The company believes it will prevail on these matters and that this amount is not a meaningful indicator of liability.

Notes to Consolidated Financial Statements — (continued)

15. Equity Activity:

Reclassifications and Taxes Related to Items of Other Comprehensive Income


(Dollars in millions)	Before Tax Amount		Tax (Expense)/ Benefit		Net of Tax Amount
For the three months ended June 30, 2025:
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(613)	$	399	$	(215)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	(5)	$	1	$	(4)
Reclassification of (gains)/losses to other (income) and expense	—		—		—
Total net changes related to available-for-sale securities	$	(5)	$	1	$	(4)
Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(82)	$	24	$	(59)
Reclassification of (gains)/losses to:
Cost of services	4		(1)		3
Cost of sales	5		(2)		4
Cost of financing	1		0		1
SG&A expense	2		(1)		1
Other (income) and expense	(436)		110		(327)
Interest expense	6		(1)		4
Total unrealized gains/(losses) on cash flow hedges	$	(501)	$	128	$	(373)
Retirement-related benefit plans: (1)
Prior service costs/(credits)	$	0	$	0	$	0
Net gains/(losses) arising during the period	0		8		8
Curtailments and settlements	5		(2)		3
Amortization of prior service costs/(credits)	(2)		1		(1)
Amortization of net (gains)/losses	157		(42)		115
Total retirement-related benefit plans	$	160	$	(35)	$	125
Other comprehensive income/(loss)	$	(959)	$	493	$	(466)

(1)These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost. Refer to note 18, “Retirement-Related Benefits,” for additional information.

Notes to Consolidated Financial Statements — (continued)

Reclassifications and Taxes Related to Items of Other Comprehensive Income


(Dollars in millions)	Before Tax Amount		Tax (Expense)/ Benefit		Net of Tax Amount
For the three months ended June 30, 2024:
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	2	$	(68)	$	(66)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	1	$	0	$	0
Reclassification of (gains)/losses to other (income) and expense	—		—		—
Total net changes related to available-for-sale securities	$	1	$	0	$	0
Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	103	$	(28)	$	75
Reclassification of (gains)/losses to:
Cost of services	(9)		3		(7)
Cost of sales	(15)		5		(10)
Cost of financing	2		0		1
SG&A expense	(7)		2		(5)
Other (income) and expense	(21)		5		(16)
Interest expense	8		(2)		6
Total unrealized gains/(losses) on cash flow hedges	$	61	$	(16)	$	45
Retirement-related benefit plans: (1)
Prior service costs/(credits)	$	—	$	—	$	—
Net gains/(losses) arising during the period	0		2		2
Curtailments and settlements	2		(1)		2
Amortization of prior service costs/(credits)	(2)		0		(1)
Amortization of net (gains)/losses	258		(71)		187
Total retirement-related benefit plans	$	259	$	(69)	$	190
Other comprehensive income/(loss)	$	322	$	(153)	$	169

(1)These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “Retirement-Related Benefits,” for additional information.

Notes to Consolidated Financial Statements — (continued)


(Dollars in millions)	Before Tax Amount		Tax (Expense)/ Benefit		Net of Tax Amount
For the six months ended June 30, 2025:
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	(956)	$	602	$	(354)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	2	$	(1)	$	2
Reclassification of (gains)/losses to other (income) and expense	—		—		—
Total net changes related to available-for-sale securities	$	2	$	(1)	$	2
Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	(141)	$	40	$	(101)
Reclassification of (gains)/losses to:
Cost of services	5		(1)		4
Cost of sales	(2)		1		(2)
Cost of financing	2		(1)		2
SG&A expense	(2)		0		(1)
Other (income) and expense	(758)		191		(567)
Interest expense	12		(3)		9
Total unrealized gains/(losses) on cash flow hedges	$	(883)	$	227	$	(656)
Retirement-related benefit plans: (1)
Prior service costs/(credits)	$	0	$	0	$	0
Net gains/(losses) arising during the period	0		8		8
Curtailments and settlements	7		(2)		5
Amortization of prior service costs/(credits)	(4)		1		(2)
Amortization of net (gains)/losses	308		(83)		225
Total retirement-related benefit plans	$	311	$	(76)	$	236
Other comprehensive income/(loss)	$	(1,525)	$	753	$	(772)

(1)These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “Retirement-Related Benefits,” for additional information.

Notes to Consolidated Financial Statements — (continued)

Reclassifications and Taxes Related to Items of Other Comprehensive Income


(Dollars in millions)	Before Tax Amount		Tax (Expense)/ Benefit		Net of Tax Amount
For the six months ended June 30, 2024:
Other comprehensive income/(loss):
Foreign currency translation adjustments	$	57	$	(222)	$	(165)
Net changes related to available-for-sale securities:
Unrealized gains/(losses) arising during the period	$	1	$	0	$	1
Reclassification of (gains)/losses to other (income) and expense	—		—		—
Total net changes related to available-for-sale securities	$	1	$	0	$	1
Unrealized gains/(losses) on cash flow hedges:
Unrealized gains/(losses) arising during the period	$	279	$	(75)	$	204
Reclassification of (gains)/losses to:
Cost of services	(14)		4		(10)
Cost of sales	(27)		9		(18)
Cost of financing	3		(1)		2
SG&A expense	(10)		3		(7)
Other (income) and expense	58		(15)		44
Interest expense	17		(4)		13
Total unrealized gains/(losses) on cash flow hedges	$	307	$	(79)	$	227
Retirement-related benefit plans: (1)
Prior service costs/(credits)	$	—	$	—	$	—
Net gains/(losses) arising during the period	1		2		2
Curtailments and settlements	4		(1)		3
Amortization of prior service costs/(credits)	(4)		1		(3)
Amortization of net (gains)/losses	519		(143)		376
Total retirement-related benefit plans	$	520	$	(141)	$	379
Other comprehensive income/(loss)	$	885	$	(442)	$	442

(1)These AOCI components are included in the computation of net periodic pension cost. Refer to note 18, “Retirement-Related Benefits,” for additional information.

Notes to Consolidated Financial Statements — (continued)

Accumulated Other Comprehensive Income/(Loss) (net of tax)


(Dollars in millions)	Foreign Currency Translation Adjustments (1)		Net Unrealized Gains/(Losses) on Available- For-Sale Securities		Net Unrealized Gains/(Losses) on Cash Flow Hedges		Net Change Retirement- Related Benefit Plans		Accumulated Other Comprehensive Income/(Loss)
January 1, 2025	$	(3,512)	$	0	$	237	$	(11,994)	$	(15,269)
Other comprehensive income before reclassifications	(354)		2		(101)		8		(445)
Amount reclassified from accumulated other comprehensive income	—		—		(555)		228		(328)
Total change for the period	$	(354)	$	2	$	(656)	$	236	$	(772)
June 30, 2025	$	(3,865)	$	2	$	(419)	$	(11,759)	$	(16,041)


(Dollars in millions)	Foreign Currency Translation Adjustments (1)		Net Unrealized Gains/(Losses) on Available- For-Sale Securities		Net Unrealized Gains/(Losses) on Cash Flow Hedges		Net Change Retirement- Related Benefit Plans		Accumulated Other Comprehensive Income/(Loss)
January 1, 2024	$	(3,488)	$	(1)	$	(106)	$	(15,165)	$	(18,761)
Other comprehensive income before reclassifications	(165)		1		204		2		42
Amount reclassified from accumulated other comprehensive income	—		—		24		377		400
Total change for the period	$	(165)	$	1	$	227	$	379	$	442
June 30, 2024	$	(3,653)	$	(1)	$	121	$	(14,786)	$	(18,319)

(1)Foreign currency translation adjustments are presented gross except for any associated hedges which are presented net of tax.

16. Derivative Financial Instruments:

The company operates in multiple functional currencies and is a significant lender and borrower in the global markets. In the normal course of business, the company is exposed to the impact of interest rate changes and foreign currency fluctuations, and to a lesser extent equity risk. The company limits these risks by following established risk management policies and procedures, including the use of derivatives, and, where cost effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to better align rate movements between the interest rates associated with the company’s lease and other financial assets and the interest rates associated with its debt. Derivatives are also used to manage the related cost of debt. For foreign currency exposures, derivatives are used to better manage the cash flow volatility arising from foreign exchange rate fluctuations.

In the Consolidated Balance Sheet, the company does not offset derivative assets against liabilities in master netting arrangements nor does it offset receivables or payables recognized upon payment or receipt of cash collateral against the fair values of the related derivative instruments. The amount recognized in other accounts receivables for the right to reclaim cash collateral was $25 million and $29 million at June 30, 2025 and December 31, 2024, respectively. The company restricts the use of cash collateral received to rehypothecation and therefore reports it in restricted cash in the Consolidated Balance Sheet. Both the amount recognized in accounts payable for the obligation to return cash collateral and the amount rehypothecated were not material for the periods presented. Additionally, if derivative exposures covered by a qualifying master netting agreement had been netted in the Consolidated Balance Sheet at June 30, 2025 and December 31, 2024, the total derivative asset and liability positions each would have been reduced by $416 million and $352 million, respectively.

Notes to Consolidated Financial Statements — (continued)

On July 1, 2024, the company completed the acquisition of StreamSets and webMethods from Software AG. Prior to the acquisition, beginning in December 2023, the company entered into foreign currency derivative contracts which were accounted for as non-hedge derivatives and expired by June 28, 2024. For the three and six months ended June 30, 2024, the company recorded a realized loss of $18 million and $68 million, respectively, in other (income) and expense in the Consolidated Income Statement. There were no associated derivatives outstanding at June 30, 2025 and December 31, 2024.

In its hedging programs, the company may use forward contracts, futures contracts, interest-rate swaps, cross-currency swaps, equity swaps, and options depending upon the underlying exposure. The company is not a party to leveraged derivative instruments.

A brief description of the major hedging programs, categorized by underlying risk, follows.

Interest Rate Risk

Fixed and Variable Rate Borrowings

The company issues debt in the global capital markets to fund its operations and financing business. Access to cost-effective financing can result in interest rate mismatches with the underlying assets. To manage these mismatches and to reduce overall interest cost, the company may use interest-rate swaps to convert specific fixed-rate debt issuances into variable-rate debt (i.e., fair value hedges) and to convert specific variable-rate debt issuances into fixed-rate debt (i.e., cash flow hedges). At both June 30, 2025 and December 31, 2024, the total notional amount of the company’s interest-rate swaps was $6.7 billion. The weighted-average remaining maturity of these instruments at June 30, 2025 and December 31, 2024 was approximately 4.0 years and 4.5 years, respectively. These interest-rate contracts were accounted for as fair value hedges. The company did not have any cash flow hedges relating to this program outstanding at June 30, 2025 and December 31, 2024.

Foreign Exchange Risk

Long-Term Investments in Foreign Subsidiaries (Net Investment)

A large portion of the company’s foreign currency denominated debt portfolio is designated as a hedge of net investment in major foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the subsidiaries' functional currency with respect to the U.S. dollar. At June 30, 2025 and December 31, 2024, the carrying value of debt designated as hedging instruments was $16.5 billion and $14.0 billion, respectively. The company also uses foreign currency derivatives, which may include forward contracts, long-term cross currency swaps, and options, for this risk management purpose. At June 30, 2025 and December 31, 2024, the total notional amount of derivative instruments designated as net investment hedges was $7.5 billion and $6.2 billion, respectively. At both June 30, 2025 and December 31, 2024, the weighted-average remaining maturity of these instruments was less than one year.

Anticipated Royalties and Cost Transactions

The company’s operations generate significant nonfunctional currency, third-party vendor payments and intercompany payments for royalties and goods and services among the company’s non-U.S. subsidiaries and with the company. In anticipation of these foreign currency cash flows and in view of the volatility of the currency markets, the company selectively employs foreign exchange forward contracts to manage its currency risk. These forward contracts are accounted for as cash flow hedges. At June 30, 2025, the maximum remaining length of time over which the company hedged its exposure is approximately two years. At June 30, 2025 and December 31, 2024, the total notional amount of forward contracts designated as cash flow hedges of forecasted royalty and cost transactions was $10.7 billion and $9.7 billion, respectively. At June 30, 2025 and December 31, 2024, the weighted-average remaining maturity of these instruments was less than one year.

Notes to Consolidated Financial Statements — (continued)

At June 30, 2025 and December 31, 2024, in connection with cash flow hedges of anticipated royalties and cost transactions, there were unrealized net losses (before taxes) of $380 million and net unrealized gains (before taxes) of $415 million, respectively, deferred in AOCI. The company estimates that $442 million of the deferred net losses (before taxes) on derivatives in AOCI at June 30, 2025 will be reclassified to net income within the next 12 months, providing an offsetting economic impact against the underlying anticipated transactions.

Foreign Currency Denominated Borrowings

The company is exposed to exchange rate volatility on foreign currency denominated debt. To manage this risk, the company may employ forward contracts or cross-currency swaps to convert the principal, or principal and interest payments of foreign currency denominated debt, to debt denominated in the functional currency of the borrowing entity. These derivatives are accounted for as cash flow hedges.

At June 30, 2025, the maximum length of time remaining over which the company hedged its exposure was approximately six years. At June 30, 2025 and December 31, 2024, the total notional amount of derivative instruments designated as cash flow hedges of foreign-currency denominated debt was $5.9 billion and $5.0 billion, respectively.

At June 30, 2025 and December 31, 2024, in connection with forward contracts, there were unrealized net losses (before taxes) of $17 million and net unrealized gains (before taxes) of $84 million, respectively, deferred in AOCI. Approximately $96 million of losses (before taxes) related to the initial forward points excluded from the assessment of hedge effectiveness is expected to be amortized to other (income) and expense within the next 12 months.

Subsidiary Cash and Foreign Currency Asset/Liability Management

The company uses its Global Treasury Centers to manage the cash of its subsidiaries. These centers principally use currency swaps to convert cash flows in a cost-effective manner. In addition, the company uses forward contracts to economically hedge, on a net basis, the foreign currency exposure of a portion of the company’s nonfunctional currency assets and liabilities. The terms of these forward and swap contracts are generally less than one year. The changes in the fair values of these contracts and of the underlying hedged exposures are generally offsetting and are recorded in other (income) and expense in the Consolidated Income Statement. At June 30, 2025 and December 31, 2024, the total notional amount of derivative instruments in economic hedges of foreign currency exposure was $5.9 billion and $7.4 billion, respectively.

Equity Risk Management

The company is exposed to market price changes in certain broad market indices and in the company’s own stock primarily related to certain obligations to employees. Changes in the overall value of these employee compensation obligations are recorded in SG&A expense in the Consolidated Income Statement. Although not designated as accounting hedges, the company utilizes derivatives, including equity swaps and futures, to economically hedge the exposures related to its employee compensation obligations. The derivatives are linked to the total return on certain broad market indices or the total return on the company’s common stock, and are recorded at fair value with gains or losses also reported in SG&A expense in the Consolidated Income Statement. At June 30, 2025 and December 31, 2024, the total notional amount of derivative instruments in economic hedges of these compensation obligations was $1.3 billion and $1.5 billion, respectively.

Notes to Consolidated Financial Statements — (continued)

Cumulative Basis Adjustments for Fair Value Hedges

At June 30, 2025 and December 31, 2024, the following amounts were recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:


(Dollars in millions)	June 30, 2025		December 31, 2024
Short-term debt:
Carrying amount of the hedged item	$	(5)	$	(13)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities)	$	(5)	$	(13)
Long-term debt:
Carrying amount of the hedged item	$	(6,627)	$	(6,497)
Cumulative hedging adjustments included in the carrying amount — assets/(liabilities) (1)	$	62	$	190

(1)Includes $(133) million and $(155) million of hedging adjustments on discontinued hedging relationships at June 30, 2025 and December 31, 2024, respectively.

The Effect of Derivative Instruments in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income

The total effects of all fair value hedges, cash flow hedges, net investment hedges and derivatives not designated as hedging instruments are summarized by income and expense line items as follows:


	Gains/(Losses) of Total Hedge Activity
	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024		2025		2024
Cost of services	$	(4)	$	9	$	(5)	$	14
Cost of sales	$	(5)	$	15	$	2	$	27
Cost of financing	$	0	$	(4)	$	1	$	(7)
SG&A expense	$	114	$	11	$	83	$	85
Other (income) and expense (1)	$	601	$	(140)	$	1,043	$	(427)
Interest expense	$	3	$	(19)	$	5	$	(34)

(1)Primarily driven by currency gains and losses on the company's foreign currency derivatives hedging programs. Refer to note 6, "Other (Income) and Expense," for additional information.

Notes to Consolidated Financial Statements — (continued)


	Gains/(Losses) Recognized in Consolidated Income Statement
(Dollars in millions)	Consolidated Income Statement Line Item		Recognized on Derivatives						Attributable to Risk Being Hedged (1)
For the three months ended June 30:		2025			2024			2025			2024
Derivative instruments in fair value hedges: (2)
Interest rate contracts	Cost of financing		$	2		$	(8)		$	(5)		$	2
	Interest expense		13			(42)			(28)			10
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts	Other (income) and expense		165			(161)			N/A			N/A
Equity contracts	SG&A expense		115			4			N/A			N/A

Total			$	295		$	(207)		$	(33)		$	12


	Gains/(Losses) Recognized in Consolidated Income Statement and Other Comprehensive Income
	Recognized in OCI				Consolidated Income Statement Line Item		Reclassified from AOCI						Amounts Excluded from Effectiveness Testing (3)
(Dollars in millions)
For the three months ended June 30:	2025		2024			2025			2024			2025			2024
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—	$	—	Cost of financing		$	0		$	(1)		N/A			N/A
					Interest expense		(3)			(3)			N/A			N/A
Foreign exchange contracts
Amount included in the assessment of effectiveness	(25)		134		Cost of services		(4)			9			N/A			N/A
					Cost of sales		(5)			15			N/A			N/A
					Cost of financing		(1)			(1)			N/A			N/A
					SG&A expense		(2)			7			N/A			N/A
					Other (income) and expense		466			39			N/A			N/A
					Interest expense		(3)			(5)			N/A			N/A
Amount excluded from the assessment of effectiveness	(57)		(31)		Other (income) and expense		N/A			N/A			(30)			(18)
Instruments in net investment hedges: (4)
Foreign exchange contracts
Amount included in the assessment of effectiveness	(1,585)		269
Amount excluded from the assessment of effectiveness	0		—		Cost of financing		N/A			N/A			4			4
					Interest expense		N/A			N/A			24			21

Total	$	(1,668)	$	372			$	449		$	61		$	(2)		$	6

(1)The amount includes basis adjustments to the carrying value of the hedged item recorded during the period and amortization of basis adjustments recorded on de-designated hedging relationships during the period.

(2)The amount includes changes in clean fair values of the derivative instruments in fair value hedging relationships and the periodic accrual for coupon payments required under these derivative contracts.

(3)Amounts excluded from effectiveness testing for both net investment hedges and cash flow hedges of foreign currency debt are amortized to net income on a straight line basis over the life of the relevant hedging instrument.

(4)Instruments in net investment hedges include derivative and non-derivative instruments with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries.

N/A - not applicable

Notes to Consolidated Financial Statements — (continued)


	Gains/(Losses) Recognized in Consolidated Income Statement
(Dollars in millions)	Consolidated Income Statement Line Item		Recognized on Derivatives						Attributable to Risk Being Hedged (1)
For the six months ended June 30:		2025			2024			2025			2024
Derivative instruments in fair value hedges: (2)
Interest rate contracts	Cost of financing		$	13		$	(35)		$	(18)		$	23
	Interest expense		72			(180)			(101)			120
Derivative instruments not designated as hedging instruments:
Foreign exchange contracts	Other (income) and expense		285			(368)			N/A			N/A
Equity contracts	SG&A expense		81			75			N/A			N/A
Total			$	451		$	(509)		$	(119)		$	143


	Gains/(Losses) Recognized in Consolidated Income Statement and Other Comprehensive Income
	Recognized in OCI				Consolidated Income Statement Line Item		Reclassified from AOCI						Amounts Excluded from Effectiveness Testing (3)
(Dollars in millions)
For the six months ended June 30:	2025		2024			2025			2024			2025			2024
Derivative instruments in cash flow hedges:
Interest rate contracts	$	—	$	—	Cost of financing		$	(1)		$	(1)		N/A			N/A
					Interest expense		(6)			(7)			N/A			N/A
Foreign exchange contracts
Amount included in the assessment of effectiveness	17		300		Cost of services		(5)			14			N/A			N/A
					Cost of sales		2			27			N/A			N/A
					Cost of financing		(1)			(2)			N/A			N/A
					SG&A expense		2			10			N/A			N/A
					Other (income) and expense		814			(22)			N/A			N/A
					Interest expense		(6)			(10)			N/A			N/A
Amount excluded from the assessment of effectiveness	(158)		(21)		Other (income) and expense		N/A			N/A			(56)			(37)
Instruments in net investment hedges: (4)
Foreign exchange contracts
Amount included in the assessment of effectiveness	(2,406)		881
Amount excluded from the assessment of effectiveness	11		—		Cost of financing		N/A			N/A			8			8
					Interest expense		N/A			N/A			45			43

Total	$	(2,535)	$	1,160			$	798		$	9		$	(3)		$	14

(4)Instruments in net investment hedges include derivative and non-derivative instruments with the amounts recognized in OCI providing an offset to the translation of foreign subsidiaries.

N/A - not applicable

Notes to Consolidated Financial Statements — (continued)

For the three and six months ended June 30, 2025 and 2024, there were no material gains or losses associated with an underlying exposure that did not or was not expected to occur (for cash flow hedges); nor are there any anticipated in the normal course of business.

17. Stock-Based Compensation:

Stock-based compensation cost for stock awards and stock options is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations.


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in millions)	2025		2024		2025		2024


Cost	$	67	$	53	$	132	$	109
Selling, general and administrative	244		172		461		343
Research and development	130		90		249		183
Pre-tax stock-based compensation cost	$	441	$	316	$	842	$	636
Income tax benefits	(156)		(101)		(350)		(222)
Total net stock-based compensation cost	$	285	$	214	$	492	$	414

Pre-tax stock-based compensation cost for the three months ended June 30, 2025 increased $125 million compared to the corresponding period in the prior year due to increases in restricted stock units ($102 million) and performance share units ($13 million).

Pre-tax stock-based compensation cost for the six months ended June 30, 2025 increased $206 million compared to the corresponding period in the prior year due to increases in restricted stock units ($154 million), performance share units ($34 million), and stock options ($14 million).

For the three and six months ended June 30, 2025, the pre-tax stock-based compensation cost increases reflect the company's annual cycles for executives and other employees and the issuance and assumption of stock-based compensation awards in connection with the HashiCorp acquisition.

Total unrecognized compensation cost related to non-vested awards at June 30, 2025 was $2.5 billion and is expected to be recognized over a weighted-average period of approximately 2.4 years.

18. Retirement-Related Benefits:

The company offers defined benefit (DB) pension plans, defined contribution (DC) plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits.

The following tables provide the pre-tax cost for all retirement-related plans.


					Yr.-to-Yr.
(Dollars in millions)					Percent
For the three months ended June 30:	2025		2024		Change
Retirement-related plans — cost:
Defined benefit pension and defined contribution plans — cost	$	248	$	320	(22.5	%)
Nonpension postretirement plans — cost	32		30		8.3	%
Total	$	281	$	350	(19.9	%)

Notes to Consolidated Financial Statements — (continued)


					Yr.-to-Yr.
(Dollars in millions)					Percent
For the six months ended June 30:	2025		2024		Change
Retirement-related plans — cost:
Defined benefit pension and defined contribution plans — cost	$	482	$	643	(25.1	%)
Nonpension postretirement plans — cost	65		60		7.2	%
Total	$	546	$	704	(22.4	%)

Cost/(Income) of Retirement Plans

The following tables provide the components of the cost/(income) for the company’s retirement-related benefit plans.


(Dollars in millions)	U.S. Plans				Non-U.S. Plans
For the three months ended June 30:	2025		2024		2025		2024
Service cost	$	88	$	98	$	44	$	41
Interest cost (1)	187		254		267		264
Expected return on plan assets (1)	(268)		(340)		(369)		(384)
Amortization of prior service costs/(credits) (1)	—		—		6		5
Recognized actuarial losses (1)	70		129		87		128
Curtailments and settlements (1)	—		—		5		2
Multi-employer plans	—		—		3		3
Other costs/(credits) (1)	—		—		10		12
Total net periodic pension (income)/cost of defined benefit plans	$	77	$	140	$	52	$	71
Cost of defined contribution plans	17		15		103		94
Total defined benefit pension and defined contribution plans cost recognized in the Consolidated Income Statement	$	93	$	155	$	155	$	165


(Dollars in millions)	U.S. Plans				Non-U.S. Plans
For the six months ended June 30:	2025		2024		2025		2024
Service cost	$	176	$	197	$	85	$	85
Interest cost (1)	374		508		518		532
Expected return on plan assets (1)	(536)		(681)		(715)		(773)
Amortization of prior service costs/(credits) (1)	—		—		11		11
Recognized actuarial losses (1)	140		257		169		258
Curtailments and settlements (1)	—		—		7		4
Multi-employer plans	—		—		6		6
Other costs/(credits) (1)	—		—		18		20
Total net periodic pension (income)/cost of defined benefit plans	$	154	$	280	$	99	$	143
Cost of defined contribution plans	30		27		199		193
Total defined benefit pension and defined contribution plans cost recognized in the Consolidated Income Statement	$	184	$	307	$	298	$	336

(1)These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement..

Notes to Consolidated Financial Statements — (continued)

Cost of Nonpension Postretirement Plans

The following tables provide the components of the cost for the company’s nonpension postretirement plans.


(Dollars in millions)	U.S. Plan				Non-U.S. Plans
For the three months ended June 30:	2025		2024		2025		2024
Service cost	$	0	$	1	$	0	$	1
Interest cost (1)	28		27		10		10
Expected return on plan assets (1)	—		—		0		0
Amortization of prior service costs/(credits) (1)	(7)		(7)		0		0
Recognized actuarial losses (1)	—		—		0		0
Curtailments and settlements (1)	—		—		—		—
Total nonpension postretirement plans cost recognized in the Consolidated Income Statement	$	22	$	20	$	11	$	10


(Dollars in millions)	U.S. Plan				Non-U.S. Plans
For the six months ended June 30:	2025		2024		2025		2024
Service cost	$	1	$	1	$	1	$	1
Interest cost (1)	57		53		21		21
Expected return on plan assets (1)	—		—		(1)		(1)
Amortization of prior service costs/(credits) (1)	(15)		(15)		0		0
Recognized actuarial losses (1)	—		—		0		0
Curtailments and settlements (1)	—		—		—		—
Total nonpension postretirement plans cost recognized in the Consolidated Income Statement	$	43	$	40	$	22	$	21

(1)These components of net periodic pension cost are included in other (income) and expense in the Consolidated Income Statement.

Plan Contributions

The company does not anticipate any significant changes to the expected plan contributions in 2025 from the amounts disclosed in the 2024 Annual Report. The table below includes contributions to the following plans:


(Dollars in millions)	Plan Contributions
For the six months ended June 30:	2025		2024
U.S. nonpension postretirement benefit plan	$	104	$	110
Non-U.S. DB and multi-employer plans (1)	20		40
Total plan contributions	$	124	$	150

(1)Amounts reported net of refunds.

The U.S. nonpension postretirement benefit plan contributions in the table above were made in U.S. Treasury Securities. Additionally, during both the six months ended June 30, 2025 and 2024, contributions of $390 million were made to the Active Medical Trust in U.S. Treasury securities. Contributions made with U.S. Treasury securities are considered a non-cash transaction.

19. Subsequent Events:

On July 23, 2025, the company announced that the Board of Directors approved a quarterly dividend of $1.68 per common share. The dividend is payable September 10, 2025 to stockholders of record on August 8, 2025.

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