Q & A Highlights

Q : Can you discuss the 2025 guidance and how it might play out between the first and second halves of the year, particularly with Consulting and mainframe tailwinds? A : James Kavanaugh, CFO, explained that IBM expects revenue growth of 5%+ at constant currency and strong free cash flow of $13.5 billion. The first half might see more strength in software, while Consulting is expected to accelerate in the second half. Infrastructure will contribute to growth, especially with the new mainframe launch in mid-2025.

Q : What are your thoughts on M&A, especially with record cash flows and a potentially favorable regulatory environment? A : Arvind Krishna, CEO, noted that IBM is optimistic about a more rational regulatory environment, which could facilitate reasonable deals. With strong free cash flow, IBM is prepared to pursue acquisitions that align with their strategic goals, such as the pending HashiCorp acquisition.

Q : Can you elaborate on the Consulting business and the AI software side, particularly the $1 billion AI software book of business? A : James Kavanaugh highlighted that IBM's Consulting is adapting to client spending shifts towards digital transformation and AI. The AI software business, particularly the watsonx family, is gaining traction, with products like watsonx Code Assistant driving growth.

Q : How sustainable is the growth in Transaction Processing Platforms (TPP), and what are your expectations for the mainframe cycle? A : James Kavanaugh stated that TPP growth is driven by mainframe adoption and new innovations like Watson Code Assistant for Z. The mainframe cycle has been strong, and IBM expects continued growth with the upcoming z17 launch.

Q : What is the business climate like, particularly for software, and how are customers approaching their software budgets for 2025? A : Arvind Krishna expressed optimism about the business climate, noting that technology is essential for growth. Software budgets are expected to remain robust as companies prioritize technology to achieve business goals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

This article first appeared on GuruFocus .