Dive Brief:
- IBM saw larger than anticipated growth rates on multiple fronts last year with software leading the way, Chairman and CEO Arvind Krishna said during a Q4 2025 earnings call Wednesday. The company achieved its highest level of free cash flow in over a decade, Krishna said, as revenue increased 8% year over year to $67.5 billion for the 12 months ending Dec. 31.
- Software was a key driver behind the boost. Software, which accounted for nearly 45% of the company’s business, saw revenue grow 11% year over year to almost $30 billion in 2025 — its largest increase ever, according to Krishna.
- “We are executing on our strategy to advance IBM as a software-led, hybrid cloud and AI platform company,” Krishna said. The company’s generative AI bookings surpassed $12.5 billion last year, with consulting accounting for more than $10.5 billion, he added. Software accounted for the remaining $2 billion.
Dive Insight:
While software was IBM’s prime growth engine, the company’s infrastructure division also shifted into gear last year with the April launch of the z17 mainframe.
The AI-capable units helped boost infrastructure revenue 21% year over year in the fourth quarter to $5.1 billion, contributing to zSystems’ best performance in two decades, according to Krishna.
“IBM Z continues to be the backbone of enterprise IT, enabling clients to integrate seamlessly with hybrid cloud while unlocking new levels of resiliency, scalability and performance,” CFO and SVP James Kavanaugh said during the call.
Mainframes are a cornerstone of IBM’s broader AI strategy, rooted in hybrid cloud interoperability and data sovereignty. The company leveraged Red Hat open-source technology to build a secure AI deployment platform called IBM Sovereign Core, currently in preview with general availability expected by the middle of the year.
IBM has seen enterprise demand for data sovereignty and on-premise controls grow as AI initiatives gain traction, according to Krishna.
“If I look out three to five years, 50% of the enterprise usage of AI is going to be in either a private cloud or it’s going to be in their own data centers,” he said. “The other 50% is going to be usage of public models.”
In early January, Red Hat teamed up with Nvidia to develop a hybrid cloud Linux platform for the Nvidia Rubin AI processor. The rack-scale hardware will support AI applications across hybrid cloud environments.
“Our opportunity is to make it easy for clients to build AI that is specific to their data, their processes and their competitive needs, including the effective use of smaller, more efficient models where they make sense,” Krishna said.
