AI A ‘Powerful Driver Of Transformation For Clients,’ Says IBM CEO Arvind Krishna

“We are transforming our enterprise operations using technology and embedding AI across more than 70 workflows, leveraging our own IBM software solutions across hybrid cloud automation and AI to drive competitive advantage. What differentiates IBM is the breadth of our AI offerings, with an innovative technology stack and consulting business at scale and our ‘client zero’ lens,” says IBM CEO Arvind Krishna.

IBM leveraged its own strength in software and IT infrastructure to shine in its second fiscal quarter.

IBM CEO Arvind Krishna, speaking to financial analysts Wednesday during the company’s second fiscal quarter 2025 financial conference call, said that demand remains high for technology that improves productivity, reduces costs, and fuels innovation, while the operating environment remains dynamic.

“These results reflect the strength of our portfolio and the resiliency of our business model,” Krishna (pictured) said.

IBM’s strategy remains focused on hybrid cloud and artificial intelligence, built on five reinforcing elements: client trust, flexible and open platforms, sustained innovation, deep domain expertise, and a broad ecosystem, Krishna said.

“Together, they form a flywheel of growth, which again played out this quarter in software,” he said. “We continue to see momentum, including 14 percent growth in Red Hat. HashiCorp is also off to a great start, accelerating performance in our first full quarter since closing [the acquisition] and seeing early wins with joint Ansible and TerraForm product synergies.”

Infrastructure sales rose 11 percent year over year, driven by a very strong start to IBM’s Z17 mainframe, Krishna said.

“The new IBM Z is an embodiment of the hybrid cloud and AI capabilities we bring to clients,” he said. “IBM Z continues to deliver on its core strengths—AI, security, and scalable capacity—driving its enduring nature with clients. These results were balanced by consulting performance, which continues to be impacted by the demand environment.”

AI Driving Transformation

AI remains a powerful driver of transformation for clients and IBM, Krishna said.

“We are transforming our enterprise operations using technology and embedding AI across more than 70 workflows, leveraging our own IBM software solutions across hybrid cloud automation and AI to drive competitive advantage,” he said. “What differentiates IBM is the breadth of our AI offerings, with an innovative technology stack and consulting business at scale and our ‘client zero’ lens.”

IBM’s GenAI book of business now stands at over $7.5 billion, with momentum accelerating quarter over quarter, Krishna said.

“We are seeing strong demand for our AI agents and assistants, REL AI, Granite [Language] Models, as well as an accelerating need for our consulting services to deploy AI,” he said. “Just last week, IBM was recognized as an emerging leader in the first-ever Gartner Emerging Market Quadrant for Gen AI consulting and implementation services.”

IBM this quarter unveiled new or deepened collaborations with Oracle, Box, AWS, Salesforce, Microsoft, EY, and other organizations to embed Watsonx into core business workflows at Think 2025, Krishna said.

“We launched new features for Watsonx Orchestrate, which allows users to build custom AI agents in minutes with no coding required,” he said. “There are now more than 150 pre-built, domain-specific agents in our catalog, spanning HR, sales, procurement, and IT. Our partners are building on this as well, integrating agents from Oracle, Salesforce, AWS and others. … We expanded Watsonx.data to enable our enterprise clients to get easy access and drive value from their trusted unstructured data and our web methods.”

IBM this quarter also achieved what Krishna called a major milestone with the deployment of IBM Quantum System Two in Japan in partnership with the RIKEN Center for Computational Science laboratory.

“This marks the first installation outside the United States and underscores our commitment to global leadership in quantum computing to complement our organic innovation,” he said.

Mergers and acquisitions remain important to IBM, Krishna said. IBM this quarter closed its DataStax acquisition to add real-time, scalable data capabilities to support AI-driven applications, he said.

Krishna also touched on the broader economic backdrop IBM faces, particularly when it comes to its Federal government business.

“We appreciate the administration's priority on economic growth and focused regulation, which will strengthen the U.S. competitive position,” he said. “We believe this will result in long-term value creation and enable technology to contribute to economic growth. Technology continues to serve as a key competitive advantage, allowing businesses to scale, drive efficiencies, and fuel growth, and we saw this play out in the quarter.”

Krishna also said that geopolitical tensions are prompting a few clients to move cautiously, although it is not a significant factor. “U.S. federal spending was also somewhat constrained in the first half, but we do not expect it to create long-term headwinds,” he said.

IBM By The Numbers

For its fiscal 2025 second fiscal, ended June 30, IBM reported total revenue of $16.98 billion, up 7.7 percent from the $15.77 billion the company reported for its second fiscal quarter 2024. That beat analyst expectations by $410 million, according to Seeking Alpha.

This included software revenue of $7.39 billion, up from last year’s $6.74 billion; consulting revenue of $5.31 billion, up from last year’s $5.18 billion; infrastructure revenue of $4.14 billion, up from $3.65 billion; financing revenue of $166 million, down from $169 million; and other revenue of $31 million, down from $38 million.

IBM also reported GAAP net income of $2.19 billion or $2.31 per share, up from last year’s $1.83 billion or $1.96 per share. On a non-GAAP basis, IBM reported net income of $2.65 billion or $2.80 per share.

Non-GAAP earnings beat analyst expectations by 15 cents per share, according to Seeking Alpha.

Looking ahead, IBM expects fiscal year 2025 total revenue to grow by more than 5 percent over that of fiscal 2024. The company also raised its expectations for full-year free cash flow to over $13.5 billion.