IBM Corporation (NYSE: IBM) is preparing to report its third-quarter FY25 results next week. The IT services giant has evolved its AI strategy from a technology-centric approach to a more integrated, enterprise-first model. This shift—combined with continued investment in AI platforms and an optimized business mix—has contributed to margin expansion across key segments this year.
Estimates
When IBM reports Q3 results on October 22, after the closing bell, market watchers will be expecting earnings of $2.45 per share, on an adjusted basis, and revenues of $16.1 billion. In the corresponding quarter of fiscal 2024, the company had earned $2.30 per share on revenues of $14.97 billion.
After recovering from its August lows, the performance of IBM’s stock has been quite impressive. The last closing price is up 26% from the levels seen at the beginning of the year. With a long history of dividend growth and yields that outpace the market, IBM remains a favorite among income-focused investors.
From IBM’s Q2 2025 Earnings Call:
“Through the first half of the year, our operating pretax margins have expanded by 90 basis points, ahead of our model. Despite dilution from HashiCorp. Given this performance and increased productivity savings, we are raising our expectations for IBM’s full-year operating pretax margin to expand by about a point. And our tax rate expectation for the year remains in the mid-teens. As always, the timing of discrete items can cause the rate to vary within the year. For the third quarter, we are comfortable with consensus estimates for revenue and profitability.”
Key Metrics
IBM has consistently delivered stronger-than-expected quarterly earnings over the past several years. In the second quarter, adjusted earnings from continuing operations rose to $2.80 per share from $2.43 per share in Q2 2024. Unadjusted net income was $2.19 billion or $2.31 per share in the June quarter, compared to $1.83 billion or $1.96 per share in the same period of the prior year.
The positive earnings performance was driven by an 8% YoY increase in revenues to $17.0 billion, exceeding Wall Street’s expectations. Buoyed by the positive outcome, the IBM leadership lifted its full-year 2025 free cash flow guidance to approximately $13.5 billion, targeting run-rate productivity savings of $4.5 billion by year-end. The company’s Gen AI book of business reached above $7.5 billion, inception to date, with momentum accelerating from the prior quarter.
Beyond AI
The tech firm’s pivot to hybrid cloud and AI-native platforms has helped offset the impact of the slowdown in its legacy business to a great extent. Currently, IBM’s AI strategy is focused on Watsonx Orchestrate, an Agentic AI platform that enables enterprises to deploy autonomous agents across departments, elevating AI from a support tool into a strategic driver of outcomes. Recently, the company announced an agreement to acquire Cognitus, a leading SAP services provider with AI-powered solutions. Cognitus’ mission-critical SAP solutions align with IBM’s asset-based approach to digital transformation.
The average price of IBM’s stock for the last 52 weeks is $249.41. On Friday, the shares opened at $276.15 and traded mostly higher during the session.
