For Q1 2025, IBM announced an increase in revenue, driven by software, while the decline in profit clouded its results. However, management remains confident about the year ahead. It acknowledges the current political instability, between tariffs and budget cuts by the DOGE, but insists that the impact will be limited. According to CFO James Kavanaugh, these factors will not jeopardize the annual targets. He even provided a forecast for Q2, a rare move for IBM.

Software saves

Software revenue rose 7.4% y-o-y. This is less than the 10.4% growth in the previous quarter, but enough to offset declines of 2% and 6% in consulting and infrastructure. In all, IBM posted quarterly revenue of $14.51bn, compared with $14.46bn a year earlier. However, profit fell to $1.1bn, compared with $1.6bn last year. This decline was poorly received by the markets, with the stock losing 6.5% in after-hours.

"Software momentum continued to drive revenue growth, although we saw a general slowdown in the broader portfolio," said Brent Thill, an analyst at Jefferies. Software AI stood out, with an additional $200m this quarter. The AI portfolio now exceeds $6 billion since its launch, but consulting remains dominant, accounting for around 80% of the overall figure.

2025 under control

In an uncertain environment, IBM is focusing on a reassuring message. "Management has suggested minimal impact on IBM under the current US tariff policy," Brent Thill said. Indeed, less than 5% of the company's overall spending is on goods imported into the US. At DOGE, federal consulting contracts account for less than 10% of consulting business, and their share of total revenue does not exceed 5%. Recently canceled projects account for less than $100m out of an order book of over $30bn.

Another notable move is the publication of a forecast for the second quarter. James Kavanaugh explains this decision by citing the exceptional circumstances: "Given the unprecedented uncertainty currently facing the market, we have decided to issue a revenue guidance range for the second quarter. We believe it is our duty to be as transparent as possible with our investors." IBM is therefore forecasting revenue of between $16.40bn and $16.75bn for the quarter ending in June, above the average market forecast of $16.33bn.