INTERNATIONAL BUSINESS MACHINES CORP

International Business Machines Corporation operates at the intersection of business insight and technological innovation, creating sustained value for clients by helping them leverage the power of hybrid cloud and artificial intelligence. The company's hybrid cloud platform and AI technology support clients' digital transformations and help them reimagine critical workflows at scale, and modernize applications to increase agility, drive innovation and create operational efficiencies. IBM's offerings draw from leading capabilities in software, consulting services capability to deliver business outcomes, and deep incumbency in mission-critical infrastructure, all bolstered by one of the world's leading research organizations.

IBM is a globally integrated enterprise that participates in a highly competitive environment, with competitors varying by industry segment and ranging from large multinational enterprises to smaller, more narrowly focused entities. Across its business segments, the company recognizes hundreds of competitors worldwide. The principal competitors in the Software segment include Alphabet (Google), Amazon, BMC, Broadcom, Microsoft, Oracle, Salesforce, SAP and Splunk, a CISCO Company. In Consulting, competitors include global firms such as Accenture, Capgemini, India-based service providers, management consulting firms, the consulting practices of public accounting firms, engineering service providers, and niche specialists. In Infrastructure, principal competitors include Dell Technologies, Hewlett-Packard Enterprise (HPE), Intel, NetApp and Pure Storage as well as original device manufacturers. In Financing, the company primarily competes with non-captive financing entities and financial institutions. IBM differentiates from other providers by bringing together incumbency with enterprises, deep expertise in technology, industries and business processes, a broad go-to-market reach including an ecosystem of partners and alliances, and a strong focus on innovation.

IBM generates revenue through a mix of software, consulting, infrastructure, and financing offerings. The company's hybrid cloud platform and AI technology support clients' digital transformations. IBM's strategic partners include Adobe, Amazon Web Services (AWS), Microsoft, Oracle, Palo Alto Networks, Salesforce, Samsung Electronics and SAP, among others. The company offers its products directly and through a variety of third-party distributors, resellers, independent software vendors, independent service providers, and other ecosystem partners.

The Software segment provides hybrid cloud and AI platforms that allow clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. The Consulting segment integrates strategy, experience design, technology and operations expertise by domain across industries to deliver transformation for clients, operating in a highly competitive, dynamic market that spans business consulting, systems integration, application development and management, and business process outsourcing services. The Infrastructure segment provides on-premises and cloud-based server and storage solutions, gaining advantage and differentiation through investments in higher-value capabilities including security, scalability, and reliability designed especially for mission-critical and AI workloads, and also offers a portfolio of life-cycle services for hybrid cloud infrastructure deployment. The Financing segment provides client and commercial financing, facilitating IBM clients' acquisition of hardware, software and services, with the ability to manage credit and residual value risk generating a competitive advantage.

On February 27, 2025, IBM completed the acquisition of HashiCorp, Inc. for a total purchase price of $6.4 billion ¹, consisting of $6.0 billion ² of cash paid to HashiCorp stockholders and $0.4 billion ³ of equity awards assumed. The company also acquired StreamSets and webMethods on July 1, 2024 for a total purchase price of $2.3 billion ⁴. On December 8, 2025, IBM entered into a definitive agreement to acquire Confluent, Inc. in an all-cash transaction valued at approximately $6.5 billion ⁵, which is expected to close in the second quarter of 2026. The company sold The Weather Company on January 31, 2024 for cash proceeds of $1.0 billion ⁶ and sold the QRadar SaaS business on August 31, 2024 for cash proceeds of $0.1 billion ⁷. On October 30, 2018, the Board of Directors authorized $4.0 billion ⁸ in funds for use in the company's common stock repurchase program, though the company suspended its share repurchase program at the time of the Red Hat closing in 2019. As of December 31, 2025, the remaining authorization under the program was $2,007,611,768 ⁹.

For the fiscal year ended December 31, 2025, IBM reported total revenue of $62,753 million ¹⁰, compared to $62,753 million ¹¹ in 2024 and $61,860 million ¹² in 2023. Net income was $6,585 million ¹³ in 2025, compared to $6,026 million ¹⁴ in 2024 and $7,502 million ¹⁵ in 2023. Diluted earnings per share was $7.14 ¹⁶ in 2025, compared to $6.52 ¹⁷ in 2024 and $8.19 ¹⁸ in 2023. The company generated net cash from operating activities of $13,048 million ¹⁹ in 2025, compared to $12,793 million ²⁰ in 2024 and $13,904 million ²¹ in 2023. Free cash flow was $10,900 million ²² in 2025, compared to $12,100 million ²³ in 2024.

IBM continues to invest significantly in key strategic areas, including AI, to drive revenue growth and market share gains. The company is increasingly applying AI technologies to its services and products, to how it delivers solutions to IBM clients, and to its own internal operations. IBM is investing in and offering new products and services associated with AI development, deployment, governance, and management. The company's growth vectors also include hybrid cloud, quantum computing, and other disruptive technologies, where it can differentiate itself through responsible innovation by leveraging its investments in R&D and attracting a successful developer ecosystem.

The company's growth strategy also includes acquisitions, as demonstrated by the pending acquisition of Confluent, Inc. in an all-cash transaction valued at approximately $6.5 billion , expected to close in the second quarter of 2026. IBM has made and expects to continue to make acquisitions, alliances and divestitures to optimize its portfolio with organic and inorganic innovations and effective resource allocation. The company also proactively partners with a broad variety of companies including hyperscalers, service providers, global system integrators, and software and hardware vendors to deliver end-to-end solutions that address clients' complex business challenges while accelerating growth.

On an ongoing basis, IBM seeks to drive greater agility, productivity, flexibility and cost savings by continuously transforming with the use of automation, AI, agile processes and changes to the ways of working, while also enabling the scaling of resources, offerings and investments through the company's globally integrated model across both emerging and more established markets. The company's drive for greater agility, productivity, flexibility and cost savings by continuously transforming with the use of AI may not yield intended gains in speed, quality, productivity and enablement of rapid scaling.

IBM's facilities as of December 31, 2025 consisted of approximately 39 million square feet ²⁴ worldwide. In the U.S., facilities had aggregate floor space of approximately 17 million square feet ²⁵, of which approximately 8 million ²⁶ was owned and 9 million ²⁷ was leased. Outside the U.S., facilities totaled approximately 22 million square feet ²⁸, of which approximately 3 million ²⁹ was owned and 19 million ³⁰ was leased. This space is primarily used for sales and distribution, manufacturing and development, data processing services including the company's cloud centers, research and other administrative and general support purposes.

The company's capital allocation priorities include continued investment in R&D, capital expenditures, and returning capital to shareholders through dividends. The company's common stock repurchase program has a remaining authorization of $2,007,611,768 as of December 31, 2025, though the program has been suspended since 2019. The company also maintains a dividend policy, though the filing does not specify a particular dividend amount or payout ratio.

IBM faces structural headwinds from a highly competitive environment, with competitors ranging from large multinational enterprises to smaller, more narrowly focused entities. The company is regularly exposed to new competitors as it executes its hybrid cloud and AI strategy. Client adoption rates and viable economic models are less certain in the high-value, highly competitive, and rapidly-growing segments. Additionally, emerging business and delivery models may unfavorably impact demand and profitability for the company's other products or services. The company's financial results are difficult to predict due to factors such as the introduction of new products and services, the ability to compete effectively in increasingly competitive marketplaces, the length of the sales cycles and the seasonality of technology purchases.

Geographic, regulatory, and macro factors also present constraints. IBM derives about sixty percent ³¹ of its revenues from sales outside the United States, doing business in over 175 countries ³² worldwide. Changes in the laws or policies of the countries in which the company operates, or inadequate development or enforcement of such laws or policies, could affect the company's business and overall results of operations. The company's results of operations also could be affected by economic and political changes in those countries and by macroeconomic changes, including recessions, inflation, currency fluctuations between the U.S. dollar and non-U.S. currencies, capital controls, and adverse changes in trade relationships amongst those countries. International trade disputes could create uncertainty, and tariffs, international trade sanctions, and export controls on goods, technologies, inputs, and raw materials resulting from these disputes could affect the company's ability to move goods and services across borders, or could impose added costs to those activities.

IBM faces material risks from its significant investments in growth areas including AI, where client adoption rates and viable economic models are less certain in highly competitive and rapidly-growing segments, and emerging business and delivery models may unfavorably impact demand and profitability for other products or services. The company derives about sixty percent of its revenues from sales outside the United States, doing business in over 175 countries , exposing it to economic and political changes, currency fluctuations, and adverse changes in trade relationships, including tariffs and export controls that could affect its ability to move goods and services across borders or impose added costs. The company's pension plans expose it to risk from adverse financial market conditions that could negatively impact the value of pension trust assets and future estimated pension liabilities, potentially requiring incremental funding with resulting liquidity risk. The company's financing business is exposed to risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on associated debt and liabilities, and the determination of residual values. Additionally, the company's goodwill or amortizable intangible assets may become impaired if it does not realize all the economic benefit from acquisitions, which could require a charge to the Consolidated Income Statement.

Management's message emphasizes IBM's focus on the intersection of business insight and technological innovation, creating sustained value for clients by helping them leverage the power of hybrid cloud and artificial intelligence. The company's hybrid cloud platform and AI technology support clients' digital transformations and help them reimagine critical workflows at scale, and modernize applications to increase agility, drive innovation and create operational efficiencies. The strategic priorities emphasized for the period ahead include continuing to invest in key strategic areas, including AI, to drive revenue growth and market share gains, optimizing the portfolio with organic and inorganic innovations and effective resource allocation, and driving greater agility, productivity, flexibility and cost savings by continuously transforming with the use of automation, AI, agile processes and changes to the ways of working.