IBM Stock Rises as Q2 Earnings Beat Expectations and Free Cash Flow Guidance Increases
IBM stock saw positive movement following the company’s strong Q2 earnings report, which surpassed Wall Street expectations on both revenue and earnings per share. CEO Arvind Krishna also raised the company’s guidance on free cash flow, signaling strength in IBM’s core software and mainframe business segments.
IBM Q2 2025 Financial Results: Key Highlights
$IBM | IBM is -5.5% after-hours.
🔹 EPS: $2.80 vs. $2.65 est. ✅
🔹 Revenue: $16.98B vs. $16.59B est. ✅Key takeaways:
🔸 Software revenue: +10% YoY
🔸 Consulting revenue: +3% YoY
🔸 Infrastructure revenue: +3% YoY
🔸 FY FCF outlook: $13.5B ($13.0B prior) pic.twitter.com/1qEZpVobZp— CMG Venture Group (@CmgVenture) July 23, 2025
IBM reported better-than-expected results for the second quarter:
Revenue: $16.98 billion (vs. $16.59B expected)
Non-GAAP EPS: $2.80 (vs. $2.64 expected)
Free Cash Flow Forecast: Raised to over $13.5 billion for the full year
This financial performance gave a solid boost to IBM stock in after-hours trading.
Software and Mainframe Lead the Way
CEO Arvind Krishna identified software and mainframe as the quarter’s standout performers. These two areas provided stronger profitability and contributed significantly to the bottom-line beat.
“We did well in software and really well on the mainframe. Those are the two standouts for the quarter,” said Krishna.
With software margins being higher, the company is increasingly leaning on this segment to drive future growth.
Outlook for Consulting, Revenue, and Growth
IBM’s consulting business remained flat — a notable improvement from its previous decline in Q1. Krishna noted that while he doesn’t expect a major rebound this year, the outlook for 2026 is more optimistic.
He also reaffirmed the company’s confidence in achieving at least 5% constant currency revenue growth in 2025.
“You can engineer earnings, but you can’t hide revenue growth,” Krishna emphasized, highlighting IBM’s focus on free cash flow and revenue as core financial indicators.
Software Growth Expectations for IBM Stock Investors
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Krishna stated that IBM’s software segment is expected to grow between 7% and 10%, nearing double-digit territory. With 80% of IBM’s software revenue being subscription-based or recurring, the company is in a strong position for sustained growth, a promising sign for long-term IBM stock investors.
CEO Views on the Global Economy
Contrary to some predictions of slow economic growth, Krishna expressed optimism:
“I don’t see sub-1% GDP. In the U.S., I think we’ll be around 2%, and globally, mid-twos with inflation around 3%. That means most regions are seeing 5%+ nominal growth.”
While he acknowledged some regional headwinds, such as geopolitical tensions in parts of the Middle East, Krishna believes the overall macro environment remains supportive for business.
International Sentiment Toward Brand America
Last quarter, Krishna flagged concerns about rising anti-American sentiment abroad. However, he now believes that the sentiment has eased significantly:
“People realize we need to be part of a global trading system. The emotion and heat have gone away,” he explained.
This is seen as positive news for IBM stock, given its global client base and reliance on international markets.
What This Means for IBM Stock
With improving margins in software, solid mainframe performance, and growing free cash flow, IBM is showing renewed financial strength. The raised guidance and CEO confidence signal potential upside for IBM stock, especially as the company pivots more toward high-margin software and AI-driven services.
Bottom Line:
Investors may want to keep a close eye on IBM stock, especially as the company proves its ability to deliver both top-line growth and robust free cash flow — even in a mixed macro environment.
