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IBM’s Mainframe Growth Boosts Q2 2025 Earnings; Software Sales Disappoint

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Business Honor - IBM Q2 Earnings: Mainframe Growth & Software Woes

Business Honor
31 July, 2025

IBM's Q2 2025 results show strong mainframe growth and generative AI success, despite setbacks.

IBM Q2 2025 earnings report reflected good performance, as the company registered revenues of $17 billion, a 5% year over year (YoY). While the mainframe business was great, software sales were disappointing. The company saw robust growth in its infrastructure segment, especially in its new IBM Z mainframe product. Mainframe sales rose by 67% as the company launched its next generation, the z17, in June 2025. IBM's hybrid infrastructure grew by 19%, which contributed to the overall strong trend. Infrastructure revenue reached $4.1 billion for the quarter, up 11% YoY.

Conversely, distributed infrastructure fell by 17% and infrastructure support by 3% YoY. While there were dips, IBM CFO James Kavanaugh is hopeful, attributing the z17's early success to strong demand and strategic shifts in clients' expenditures towards hardware rather than software. While IBM software sales did rise 8%, they fell slightly short of expectations, a minor letdown in otherwise good quarter. But IBM is confident of long-term growth, with sales of generative AI rising to $7.5 billion, an increase from the previous quarter of $1.5 billion. IBM also made strides in cost optimization, increasing its free cash flow to $4.8 billion, $300 million YoY. It has also shifted its distributed infrastructure manufacturing to strategic partners, which has made it more efficient.

In spite of some hurdles, IBM's quantum computing initiative is progressing, with the installation of the IBM Quantum System Two in Japan. CEO Arvind Krishna was optimistic about the broader market, pointing to growth in the global market and support from the U.S. government for AI projects. While IBM remains committed to AI innovation and growing its mainframe business, its prospects are bright, even in the face of uncertainty globally.