IBM closed Q3 2025 with 16.3 billion dollars in revenue, up 7 percent in constant currency and 9 percent year over year, its fastest pace in several years. All three core segments grew sequentially, and operating discipline showed up clearly in the numbers. Gross margin expanded to 58.7 percent, pre-tax margin climbed to 18.6 percent, and adjusted EBITDA rose 22 percent to 4.6 billion dollars. Free cash flow of 2.4 billion dollars for the quarter brought the year-to-date total to 7.2 billion dollars, a record nine-month margin for the company. IBM raised full-year guidance again, now targeting more than 5 percent revenue growth and roughly 14 billion dollars in free cash flow.
| Metric | Q3 2025 Result |
| Revenue | $16.3bn, up 7% (constant currency), 9% YoY |
| Gross Margin | 58.7% |
| Pre-tax Margin | 18.6% |
| Adjusted EBITDA | $4.6bn, up 22% |
| Free Cash Flow | $2.4bn Q3; $7.2bn YTD (record nine months) |
| Full-Year Guidance | >5% revenue growth, ~$14bn free cash flow |
This quarter’s results were not about surprise; they were about reliability. For the first time in recent memory, every business line moved in the same direction. Software rose 9 percent, Infrastructure grew 15 percent, and Consulting increased 2 percent. Automation led the software portfolio with 22 percent growth, while Red Hat bookings advanced 20 percent and OpenShift ARR passed 1.8 billion dollars. IBM Z revenue jumped 59 percent, marking the strongest two-quarter mainframe launch in two decades. Yet, even with this breadth of performance, investors were unmoved. The market response was flat because predictability, once IBM’s weakness, has now become its expectation.
| Business Line | Growth | Highlights |
| Software | +9% | Automation +22%, Red Hat bookings +20%, OpenShift ARR >$1.8bn |
| Infrastructure | +15% | IBM Z revenue +59%, strongest launch in 20 years |
| Consulting | +2% | Consistent growth across all lines |
The composition of growth continues to define IBM’s challenge. Automation and Z-hardware remain the biggest accelerants, while Transaction Processing fell another 3 percent, softening the software narrative just as HashiCorp and watsonx integration began to take hold. IBM’s ability to convert hardware momentum into recurring software monetisation is still the hinge between short-term strength and long-term valuation. The question for investors and enterprise buyers alike is no longer whether IBM can execute, it is whether it can scale that execution without fragmentation.
Operationally, the company is proving leaner and more productive. Client Zero, IBM’s internal transformation programme, now automates more than 70 workflows and has delivered 4.5 billion dollars in annualised savings. Those efficiencies are feeding both margin expansion and client credibility. But even with this progress, IBM faces a perception gap. Its operating consistency has improved faster than its storytelling. What was once a turnaround has turned into a grind, and markets are waiting for IBM to show that its AI-led growth model can sustain beyond cycles.
Greyhound Standpoint – IBM has entered a phase of controlled acceleration. The fundamentals are solid, with growth across all units, rising profitability, and credible AI execution, but cohesion is now the test. The company no longer needs to prove that it can deliver; it needs to prove that its parts can move as one. For CIOs and investors, this quarter signalled continuity rather than inflection, and that may be precisely what IBM needs before its next pivot.
Regional Performance: Steady in the West, Cautious in the East, but Balance Is Returning
IBM’s Q3 2025 results reflected a company finding its regional balance again. The Americas and Europe, Middle East and Africa remained steady growth engines, each posting a 9 percent revenue increase year on year, while Asia Pacific held flat at constant currency after several uneven quarters. Together, these results show that IBM’s expansion is broadening, even if performance across regions still varies in speed and texture.
| Region | Performance | Revenue Growth YoY |
| Americas | Steady growth | +9% |
| EMEA | Steady growth | +9% |
| Asia Pacific | Flat (constant currency) | 0% |
In the Americas, performance was driven by the full-stack pull of IBM’s platform strategy. Strong demand for IBM Z systems in U.S. federal agencies, financial institutions, and telecom operators combined with sustained Consulting momentum in Canada and Latin America. Greyhound Fieldnotes indicate that enterprise buyers in North America now view IBM as an operational partner rather than a supplier of components. Projects increasingly link infrastructure, software, and services into long-term, outcome-based engagements. For most CIOs in the region, the question has shifted from whether to use IBM to how fast IBM can scale its delivery against hyperscaler alternatives.
Across Europe, the Middle East, and Africa, growth matched the Americas but reflected a different texture. Germany and the UK continued to lead adoption of z17 systems, while Red Hat and Automation gained traction in Northern Europe’s public sector. In France and Southern Europe, procurement cycles remained slow, with several government renewals delayed by extended audit and pricing reviews. IBM’s watsonx.governance continues to resonate with regulators and enterprise compliance teams, giving the company a competitive edge in markets where explainability is now as important as performance. The opportunity is clear, but speed remains the constraint.
In Asia-Pacific, IBM’s business was stable but uneven. Japan and South Korea continued to show conservative infrastructure spending, while Australia’s Consulting pipeline softened slightly due to delayed transformation budgets. On the upside, early Power11 projects across Southeast Asia, particularly in Singapore and Malaysia, are driving new conversations around AI-enabled infrastructure. Interest in watsonx Orchestrate for procurement and HR automation is growing, but buyers still cite fragmented post-sale support as a key friction point. Greyhound Fieldnotes suggest that IBM’s regional success will depend on localising delivery ownership, rather than running Asia from global centres.
Greyhound Standpoint – IBM’s regional picture this quarter reflects steady progress rather than breakout performance. The Americas and EMEA remain dependable growth anchors, underpinned by high client retention and expanding AI-led engagements. APAC is stabilising, but delivery cohesion and regional autonomy are still limiting factors. For global CIOs, IBM now represents a predictable partner — one capable of consistent delivery, but still working to make that consistency feel local.
Segment Highlights: Strength Across the Stack, but Balance Still a Work in Progress
IBM’s third-quarter results showed solid progress across all its major businesses. Software, Infrastructure, and Consulting each contributed to growth, although the pace and sources of that growth varied. Software revenue rose 9 percent, Infrastructure climbed 15 percent, and Consulting increased 2 percent. On paper that looks balanced; in practice, the story is more nuanced.
Software stayed the largest and most profitable part of IBM, bringing in 7.2 billion dollars. Automation was again the standout, up 22 percent, helped by steady demand for workflow orchestration and tighter integration with HashiCorp’s tools. Red Hat bookings grew roughly 20 percent, and OpenShift’s recurring revenue passed 1.8 billion dollars after growing more than 30 percent in the past year. Data-related offerings also expanded 7 percent, while Transaction Processing slipped 3 percent as customers focused spending on newer Z hardware.
| Key Area | Performance Highlights |
| Software Revenue | $7.2bn, largest and most profitable segment |
| Automation | Up 22%, strong workflow demand, HashiCorp integration |
| Red Hat | Bookings up ~20% |
| OpenShift | Recurring revenue over $1.8bn, up 30%+ |
| Data Offerings | Expanded by 7% |
| Transaction Processing | Down 3%, focus shifting to newer Z hardware |
Greyhound Fieldnotes show that many CIOs now treat Red Hat as the backbone of IBM’s hybrid-cloud design. With HashiCorp folded into the automation stack, IBM is pitching a single control layer that can manage infrastructure and application policy across clouds. Buyers like the simplicity, but they also note that software monetisation still lags behind the success of the Z platform.
Infrastructure had another strong quarter, reaching 3.6 billion dollars in revenue. IBM Z grew 59 percent and delivered its best third-quarter showing in almost twenty years. The new z17 systems are proving that mainframe computing and AI can coexist comfortably. Financial-services, government, and telecom clients are already running inference directly on Telum II and are preparing to extend that with the upcoming Spyre accelerator. Distributed Infrastructure revenue rose 8 percent, supported by renewed storage demand and the first meaningful Power 11 deployments for SAP RISE and AI workloads.
| Key Area | Highlights |
| Infrastructure Revenue | Strong quarter, $3.6B revenue |
| IBM Z Growth | Up 59%, best Q3 in 20 years |
| Mainframe & AI | z17 systems show coexistence |
| Client Adoption | Finance, government, telecom using Telum II, preparing for Spyre |
| Distributed Infrastructure | Revenue up 8%, driven by storage, Power 11 for SAP RISE & AI |
Greyhound Research sees this as part of IBM’s quiet transformation of its infrastructure stack into an AI execution layer. The z17 cycle is redefining where regulated enterprises run mission-critical AI, while Power 11 is starting to gain traction as an energy-efficient option for data-sovereign computing.
Consulting produced 5.3 billion dollars in revenue, up 2 percent from a year earlier and reversing three flat quarters. Intelligent Operations grew 4 percent, while Strategy and Technology held steady. Generative-AI work now represents about 12 percent of Consulting revenue and more than 20 percent of its backlog. Greyhound Fieldnotes suggest that clients are shifting from broad transformation programmes to targeted, short-cycle projects that deliver visible productivity gains. IBM’s ability to standardise and scale these AI-driven engagements will decide whether Consulting becomes a growth multiplier or stays an add-on to the product business.
Greyhound Standpoint – IBM’s portfolio is advancing, but not evenly. Software is healthy, Infrastructure remains the growth engine, and Consulting is showing early momentum. The pieces work, yet true balance will depend on how well IBM synchronises rapid innovation in Automation and z17 with the slower rhythm of software renewals and services delivery. For CIOs, the message is reassuring: IBM has regained stability. The next challenge is making that stability feel seamless.
AI-Led Momentum: Proof Points Multiply, but Expectations Are Rising
IBM’s AI story moved from concept to conviction this quarter. The company’s generative AI book of business has now passed 9.5 billion dollars since inception, adding nearly 2 billion dollars in new signings during Q3 alone. About 1.5 billion dollars came from Consulting engagements, while the rest flowed from software demand linked to watsonx, Red Hat AI, and governance solutions. The numbers confirm what IBM has been promising for over a year: its AI engine is not theoretical, it is commercial.
IBM’s approach to AI remains distinct from the hyperscaler playbook. Instead of building ever-larger models, IBM is focused on how those models operate inside regulated enterprises. watsonx Orchestrate and watsonx.governance are now at the heart of this strategy, turning AI from a productivity experiment into an operational framework. The company’s newest Granite 4.0 models, launched this quarter, use 70 percent less memory and run inference at twice the speed of conventional architectures. Partnerships with Groq and Anthropic extend IBM’s reach into high-performance inferencing and conversational AI, creating new paths for hybrid deployments.
Client adoption is beginning to reflect this maturity. Deutsche Telekom is using watsonx.ai to manage network reliability through predictive analytics. S&P Global has embedded watsonx Assistant into its reporting workflows, and State Street is using watsonx Code Assistant for Z to modernise mainframe applications directly on-platform. Each of these examples highlights IBM’s focus on bringing AI to where data already lives, not where it is cheapest to process.
Under the surface, IBM’s internal transformation continues to validate its own technology. The Client Zero initiative now covers more than seventy automated workflows across finance, HR, and supply chain, producing productivity gains of about 4.5 billion dollars. These practices are being packaged into client-ready blueprints that demonstrate measurable efficiency gains. IBM is not just selling AI software; it is selling its own experience in using AI to simplify operations at scale.
The ecosystem strategy has also become clearer. Rather than competing with hyperscalers, IBM is embedding watsonx within them, integrating with AWS, Azure, Oracle, Salesforce, and ServiceNow. The goal is to make watsonx the orchestration layer that keeps enterprise AI compliant, auditable, and connected across multiple clouds.
Greyhound Standpoint – IBM’s AI story has moved from experimentation to execution. The momentum is real, and the client proof points are credible. Yet expectations are rising just as fast. The next stage of growth will depend on how well IBM can simplify its AI stack, clarify its commercial structure, and make watsonx the default governance layer for enterprise AI. For CIOs, IBM now offers something the hyperscalers do not: an AI platform built for accountability rather than scale. The question is whether IBM can keep that lead before the rest of the market catches up.
What Clients Are Saying and Experiencing
Across more than 800 enterprise technology leaders surveyed in Greyhound CIO Pulse 2025, the tone this quarter is more measured but also more pragmatic. The majority of CIOs told us that their focus has shifted from AI adoption to AI accountability. Seventy-eight percent said they are now concentrating on how AI integrates into existing systems of record and whether it can operate under the same governance standards that regulate their core data. This change marks the difference between early curiosity and operational trust.
IBM’s hardware-led platforms are beginning to align with that shift. The z17 and Power11 systems are now being evaluated less for their technical specifications and more for their policy compliance and efficiency in regulated industries. In financial services and the public sector, the ability to perform AI inference directly on Telum II remains a major attraction, as it eliminates the need to move sensitive data off core systems. Power11 is gaining visibility for similar reasons, especially among clients running SAP RISE or hybrid cloud workloads that require controlled compute environments.
Greyhound Fieldnotes from Q3 reveal that most IBM clients are no longer assessing the individual merits of Red Hat, watsonx, or Consulting in isolation. Instead, they are looking at IBM’s ability to coordinate these elements into one coherent experience. The strongest projects are those where Consulting, Software, and Infrastructure act as a single team. Where that alignment breaks, clients report friction. As one CIO put it, “IBM’s architecture is integrated; its delivery still isn’t.”
In Europe, demand for watsonx.governance continues to climb, especially in banking and government. Clients in Germany, the UK, and the Nordics praise the product’s technical strength but often express concern about overlapping modules and complex licensing structures. These buyers want IBM to simplify how they purchase and manage AI governance tools, not just expand their capabilities.
In Asia-Pacific, IBM is seeing a rise in automation pilots moving to full production, particularly in manufacturing and logistics. watsonx Orchestrate is gaining traction, but buyers across India, Singapore, and Malaysia still describe project timelines as longer than expected. The delays, they say, often stem from coordination issues between global and regional delivery teams. IBM’s decision to expand local partner enablement programs in Malaysia and Australia could help reduce this gap in the quarters ahead.
In North America, the discussion is less about capability and more about scale. Financial institutions and federal agencies experimenting with z17 for confidential inferencing are satisfied with performance but want clearer answers on how Spyre, OpenShift AI, and watsonx will work together in hybrid environments. Confidence in compute has been earned; confidence in integration still needs to follow.
Greyhound Standpoint – IBM’s clients have moved beyond the stage of testing AI to the harder work of making it dependable. They are not questioning IBM’s technology but its ability to deliver it as one seamless experience. Buyers are looking for continuity — in pricing, in ownership, and in delivery. IBM has the architecture and the trust; what it now needs is rhythm. In Q3 2025, the company’s credibility is unquestioned. Its consistency, however, remains the true measure of progress.
Strategic Takeaways for Enterprise Buyers
For CIOs and enterprise architects looking at IBM this quarter, the story feels different. The company is not chasing momentum anymore; it is learning how to sustain it. Execution has become consistent, but the next challenge is knitting its progress together. The z17 and Power11 systems, once hardware headlines, are now real tools in production. z17 is handling inferencing for major banks and government workloads, and the upcoming Spyre accelerator is expected to expand those capabilities into generative use cases. Power11, meanwhile, is starting to show up in client discussions about data-sovereign AI and SAP RISE environments where energy costs and regulatory controls are shaping design decisions. These systems are no longer product cycles; they are the physical anchors of IBM’s AI strategy.
IBM’s software platform is also settling into form. The integration of Red Hat, watsonx, and HashiCorp is giving enterprises a clearer path to unify automation, governance, and hybrid operations. Clients tell us the technology works; what they want next is simplicity. They want one contract, one license model, and one ownership structure that stays consistent through deployment and support. IBM’s success here will depend less on new features and more on how well it removes friction from buying and running its platform.
In Consulting, IBM continues to shift its centre of gravity. The firm’s own AI playbooks from Client Zero are now showing up in client engagements, and its consulting backlog reflects a steady move toward higher-margin, shorter-duration projects focused on measurable efficiency gains. Buyers see the difference. They are engaging IBM Consulting earlier in design phases, using its reference models as proof that AI and automation can coexist with compliance and cost control. What remains is scale — ensuring that quality stays intact as Consulting expands these templates across industries and regions.
For enterprise buyers, IBM is beginning to resemble a systems company again — one that connects chips, code, and governance into a single architecture. The edges still need smoothing, but the foundation is solid. For organisations that care about control, auditability, and predictability in AI, IBM now stands apart. The coming quarters will test whether that discipline can translate into speed, but the direction is finally clear. IBM is no longer trying to prove that it can deliver. It is working to show that it can deliver seamlessly.
Greyhound Standpoint: Execution Is Holding, Integration Will Decide What Comes Next
IBM’s third quarter was not about surprise; it was about staying the course. The company’s ability to grow across all major segments while improving margins shows a discipline that has been missing for years. The z17 and Power11 systems have turned from launch stories into working proof points of what IBM now represents — a technology firm that builds where regulation and reliability matter most. These products are no longer about compute cycles; they are about control, and that is where IBM’s strength lies.
The software business continues to mature, even as its complexity occasionally slows it down. Red Hat, watsonx, and HashiCorp now share a common direction, and clients are beginning to see how the pieces connect. The next test is execution in the field. Buyers are asking for fewer handoffs, fewer licenses, and one IBM that owns the outcome from design to delivery. If the company can meet that expectation, its platform will finally feel as integrated as it looks on paper.
Consulting has become IBM’s proving ground for that idea. It is where the firm’s AI tools, governance frameworks, and automation practices come together in client settings. The quality of the backlog is improving, but clients still notice uneven execution across regions. IBM has the expertise; now it must translate that knowledge into speed and consistency. The company’s internal playbooks, refined through its own Client Zero experience, give it a head start — but that discipline needs to become habit, not initiative.
Strategically, IBM is in a position that few of its peers can claim. It has credible AI technology, a hardware backbone, and an enterprise audience that values both. What will determine its next phase is not innovation but coherence. IBM has proven it can execute. The question now is whether it can make that execution feel effortless to the clients who depend on it.
Analyst In Focus: Sanchit Vir Gogia
Sanchit Vir Gogia, or SVG as he is popularly known, is a globally recognised technology analyst, innovation strategist, digital consultant and board advisor. SVG is the Chief Analyst, Founder & CEO of Greyhound Research, a Global, Award-Winning Technology Research, Advisory, Consulting & Education firm. Greyhound Research works closely with global organizations, their CxOs and the Board of Directors on Technology & Digital Transformation decisions. SVG is also the Founder & CEO of The House Of Greyhound, an eclectic venture focusing on interdisciplinary innovation.
Copyright Policy. All content contained on the Greyhound Research website is protected by copyright law and may not be reproduced, distributed, transmitted, displayed, published, or broadcast without the prior written permission of Greyhound Research or, in the case of third-party materials, the prior written consent of the copyright owner of that content. You may not alter, delete, obscure, or conceal any trademark, copyright, or other notice appearing in any Greyhound Research content. We request our readers not to copy Greyhound Research content and not republish or redistribute them (in whole or partially) via emails or republishing them in any media, including websites, newsletters, or intranets. We understand that you may want to share this content with others, so we’ve added tools under each content piece that allow you to share the content. If you have any questions, please get in touch with our Community Relations Team at connect@thofgr.com.
Discover more from Greyhound Research
Subscribe to get the latest posts sent to your email.