IBM 10-K 2024-12-31 section summaries

Business strategy

IBM’s strategy centers on hybrid cloud and artificial intelligence (AI). It aims to help clients transform workflows, modernize applications, and improve agility and operational efficiency by combining software, consulting, mission-critical infrastructure, and research capabilities. IBM also identifies quantum computing as a potential future business opportunity. Segment and revenue detail is incorporated by reference to the 2024 Annual Report.

IBM works with hyperscalers, service providers, systems integrators, and software and hardware vendors to deliver integrated solutions. Partners include AWS, Microsoft, Oracle, Adobe, Salesforce, SAP, Samsung Electronics, and Palo Alto Networks. Some partners also compete with IBM in other areas, potentially creating channel and competitive tensions.

Competition

IBM competes globally with hundreds of established competitors and new entrants as it pursues hybrid cloud and AI opportunities. It cites innovation, performance, price, quality, brand, breadth of products and services, talent, client relationships, and delivery of business value as competitive factors. Its approach to sustaining its position includes portfolio optimization, organic and inorganic innovation, and resource allocation.

• Software: Competition includes Alphabet/Google, Amazon, Broadcom, Microsoft, Oracle, Salesforce, SAP, and niche providers. IBM emphasizes its hybrid-cloud and AI platforms, global reach, industry expertise, and research capabilities.
• Consulting: IBM competes across strategy, systems integration, application development and management, and business-process outsourcing. Competitors include Accenture, Capgemini, India-based providers, accounting-firm consulting practices, and local or specialized firms.
• Infrastructure: IBM serves hybrid-cloud environments with on-premises and cloud-based server and storage products. It emphasizes security, scalability, reliability, and lifecycle services for mission-critical and AI workloads. Competitors include Dell, HPE, Intel, NetApp, Pure Storage, original design manufacturers, and cloud service providers. Cloud providers’ technology and service-delivery innovation also creates competition and alternative routes to market.
• Financing: IBM financing facilitates client and commercial purchases of IBM hardware, software, and services. IBM describes its management of credit and residual-value risk as a competitive advantage. Competition is mainly from non-captive finance providers and financial institutions; key competitive factors include rates, IT-product expertise, service, flexibility, ease of doing business, global reach, and residual values.

The filing directs readers to the Risk Factors section for uncertainties that could cause actual results to differ materially from forward-looking statements.

IBM — Risk Factors

IBM’s principal risks arise from uncertain demand and growth execution, cybersecurity and technology threats, extensive global regulatory exposure, and its dependence on successful transformation, talent, suppliers, partners, and financial-risk management.

Demand, innovation, and execution

Economic downturns, changing client budgets and technology-purchasing patterns could weaken revenue and profitability. IBM is investing in AI—including generative AI—and other growth areas, but adoption, commercial viability, and the ability to deliver expected growth, productivity, or cost benefits remain uncertain. New offerings and business or delivery models may also displace existing products or pressure margins. If IBM cannot innovate, commercialize and scale quickly, or build adequate developer and partner ecosystems, it could lose market share.

IBM’s transformation, which incorporates automation, AI, agile processes, and changes to work practices, may not deliver targeted productivity or flexibility. Execution also depends on attracting, training, and retaining skilled employees in competitive labor markets. Workforce changes or less attractive equity awards could impair retention. IBM relies on suppliers—including a limited number of suppliers for server processor technology in some businesses—and on distributors, resellers, and other partners; disruptions, quality issues, or partners’ inability to keep pace could affect product availability and delivery.

Cybersecurity, technology, and data

IBM, its customers, and third parties face increasingly sophisticated and frequent threats, including ransomware, social engineering, extortion, destructive attacks, service disruption, and vulnerabilities in hardware, software, systems, and networks. Generative AI may enable new attack methods. IBM’s complex infrastructure and dependence on customers, vendors, contractors, partners, and the open-source community to apply patches and follow security practices mean vulnerabilities may not be identified or addressed in time. IBM’s safeguards reduce but cannot eliminate these risks or guarantee absolute security.

Because IBM systems support critical operations and handle sensitive, regulated, personal, and proprietary data—including in financial services, healthcare, critical infrastructure, and government—a breach or outage could lead to data loss, litigation, regulatory action, contractual liability or debarment, customer losses, reputational and competitive harm, and significant response costs. IBM states that cybersecurity incidents or vulnerabilities have not had a material adverse effect to date, but future incidents could.

Product defects, delivery failures, disputes, investigations, or control deficiencies could also damage IBM’s brand and customer trust. Intellectual-property protections may not prevent competition; IBM may face third-party patent claims or difficulty obtaining licenses, while some open-source software carries limited warranties or support.

Global, regulatory, and environmental exposure

IBM operates in more than 175 countries and generates about 60% of revenue outside the U.S. Its business is exposed to local political, economic, health, and legal conditions; currency movements, inflation, recessions, capital controls, trade disputes, tariffs, and sanctions; and disruptions from natural disasters, climate impacts, hostilities, or terrorism.

Requirements concerning cybersecurity, privacy, data protection and localization, international data transfers, AI, cloud, critical infrastructure, IoT, supply chains, labor, intellectual property, competition, anti-corruption, and trade are evolving and may be fragmented across jurisdictions. Compliance can raise costs and create enforcement, litigation, fines, damages, or debarment exposure, and may hinder the launch, availability, or profitability of offerings. Climate-related risks include severe weather, long-term temperature changes, environmental rules affecting hardware and data centers, carbon taxes, and expanded disclosure obligations. Environmental violations or liability could entail cleanup costs, penalties, sanctions, and claims; however, IBM does not expect climate change or climate-focused environmental compliance to disproportionately affect its financial position, results, or competitive position.

Transactions, legal matters, and government business

Acquisitions, alliances, and divestitures may not achieve strategic goals or expected revenue and cost benefits. Integration difficulties, talent retention, approvals, execution, financing needs, and liabilities retained after divestitures could adversely affect results. IBM also faces claims, litigation, investigations, tax matters, and other proceedings across its global operations, with uncertain outcomes despite its risk-management and compliance programs. Government contracts may be subject to funding delays, work stoppages, termination rights, higher liability limits, or suspension and debarment.

Financial, tax, pension, and securities risks

IBM’s tax provision and cash taxes may be affected by the geographic mix of pretax income, deferred-tax valuations, changing laws and interpretations, adoption of OECD global minimum-tax rules, and ongoing IRS or foreign tax examinations. Adverse market or credit conditions could reduce pension trust assets, increase estimated liabilities, hurt results, or require additional funding; mandatory pension-insolvency insurance premiums outside the U.S. may also rise.

IBM’s financing business is exposed to client credit concentration and creditworthiness, interest rates, currency movements, and residual-value estimates. Derivative counterparties may fail to perform, and risk-management or hedging strategies may not be effective. Since most sales are on open credit, deterioration in major customers’ creditworthiness or defaults above expectations could require a higher credit-loss allowance and reduce net income. Market-liquidity changes may affect earnings, cash flows, and access to funding.

IBM debt-security values can fluctuate with interest rates, exchange rates, maturities, redemption terms, and other factors; repayment depends on IBM’s ability to manage its business and risks. Common-stock prices may be volatile, and changes in credit ratings or outlooks could impair the value and liquidity of IBM’s debt and equity securities. IBM does not make a market in its securities and provides no assurance of their liquidity or value. Results are also difficult to predict because of sales-cycle length, seasonality, contract structures, regulatory reviews, and quarter-end order concentration; IBM historically has lower Q1 revenue than the preceding Q4. Internal-control limitations and judgment-based accounting estimates may lead to misstatements or differences between estimates and actual outcomes, while acquired goodwill and amortizable intangibles could be impaired if expected benefits do not materialize.

Cybersecurity

IBM reports that, to date, it has experienced no cybersecurity incidents or vulnerabilities that have had a material adverse effect. It cautions that future incidents or vulnerabilities could have a material impact.

Risk management and response

Cybersecurity risk management is integrated into IBM’s enterprise risk framework and is based on the NIST Cybersecurity Framework. Identified threats include the growing use of AI; criminal, hacktivist, state-sponsored and nation-state actors; intentional or inadvertent actions by employees and third parties; technology and process errors; and risks associated with remote work.

IBM uses layered security controls across its networks, devices, servers, applications, data and cloud solutions. Its safeguards include a Security Operations Center supported by internal and external threat intelligence, incident-response teams, workforce security-awareness initiatives and supplier risk assessments. IBM uses its own security offerings as well as third-party tools, and periodically engages outside parties to review or certify its practices.

Oversight and governance

The Board and Audit Committee oversee cybersecurity risk and receive regular briefings from Enterprise & Technology Security leadership, including the CISO. The CISO oversees the Computer Security Incident Response Team (CSIRT), which handles enterprise incidents, and the Product Security Incident Response Team (PSIRT), which addresses vulnerabilities in customer offerings. A cross-functional Cybersecurity Advisory Committee oversees cyber risk management, governance and noteworthy incidents.

Events of interest are escalated to senior legal and cybersecurity leadership. Incident teams assess, investigate and remediate issues, including potential impacts on clients and regulatory obligations.

Item 15 — Exhibits and Financial Statement Schedules

Item 15 is primarily an exhibit index. IBM incorporates its FY2024, FY2023 and FY2022 audited financial statements and notes from its 2024 annual report. It also presents Schedule II, “Valuation and Qualifying Accounts and Reserves”; other schedules were omitted because they were unnecessary, immaterial or included elsewhere.

Schedule II reserve balances

Balances declined across all disclosed reserve categories in 2024. The current credit-loss allowance fell mainly through $146M of write-offs, alongside $11M of net additions/deductions and $20M of foreign currency and other reductions. Noncurrent credit losses declined by $7M from additions/deductions and $1M from foreign currency and other.

Revenue-based provision reductions primarily reflect amounts remitted to customers and business partners; additions reflect estimated rebates. IBM says credit-loss write-offs primarily related to receivables previously reserved. Additions and deductions for credit losses and inventory reflect revised estimates of amounts unrecoverable, recorded to expense and cost accounts, respectively. The revenue-provision rollforward components may not sum precisely to the reported ending balance because of rounding.

PwC concluded that Schedule II was fairly presented in all material respects when read with IBM’s consolidated financial statements.

Financing and other exhibits

The exhibit index lists committed revolving credit facilities of $2.5B for three years and $7.5B for five years, originally dated June 22, 2021 and amended June 30, 2022. IBM confirmed extensions to their termination dates on June 17, 2024; the listed commitments do not establish amounts drawn or outstanding. The index also references debt instruments, including notes and debentures with stated coupons and maturities, among them 2025 maturities, but provides no principal or carrying balances.

Other exhibits cover executive and director compensation, incentive and equity-award plans, deferred compensation, employee stock purchases, the executive compensation recovery policy, securities trading, subsidiaries and securities matters, and CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906. The filing references updates to award terms and the annual incentive program.

The provided section contains only a table-of-contents/header entry for IBM’s Management Discussion; it includes no substantive financial, operational, strategic, or risk information to summarize.

Reporting changes and pension risk reduction

In Q1 2024, IBM changed its organizational structure and management reporting to better align its portfolio with the market and improve transparency and peer comparability. The changes did not affect consolidated financial statements, but changed reportable segments and the segment-profit measure; prior periods were recast for comparison.

IBM continued reducing pension-plan risk through insurer annuity transfers funded with plan assets, without additional IBM contributions. Each transfer reduced pension obligations and plan assets by approximately similar amounts.

The charges primarily reflected accelerated recognition of accumulated actuarial losses. They were non-operating and non-cash, and did not affect operating (non-GAAP) earnings or cash flow.

Non-GAAP measures and currency comparisons

IBM’s management-defined operating earnings exclude specified items, including acquisition-related charges and purchased-intangible amortization, certain equity-method investment basis-difference expense, non-operating retirement costs, certain Kyndryl separation impacts, and related tax effects. For retirement plans, service costs and defined-contribution and multi-employer plan costs remain operating; interest cost, expected asset returns, actuarial amortization, and settlement impacts are classified as non-operating. IBM says these measures provide visibility into operations and pension performance, but they are not GAAP results, and comparisons depend on IBM’s adjustment definitions.

IBM’s constant-currency growth measure translates current-period local-currency activity using comparable prior-year exchange rates. It removes exchange-rate effects for comparison, but does not remove operational impacts caused by currency movements.

IBM — FY2024 Management Discussion Snapshot

Financial performance

Revenue increased modestly, with Software growth offset by weakness in Infrastructure and Consulting. Foreign exchange reduced reported growth; currency hedging deferred, but did not eliminate, its effects. Gross margin improved on favorable portfolio mix and productivity initiatives.

Revenue grew 1.4% as reported and 3% adjusted for currency. Total expense and other income rose 16.2%, chiefly because of $3.1B in pension settlement charges ($2.4B after tax), alongside higher innovation spending and workforce-rebalancing charges. The pension settlements reduced continuing-operations diluted EPS by $2.57. The negative effective tax rate reflected tax effects of the pension charges and resolution of tax audits.

IBM’s non-GAAP operating results improved despite the weaker GAAP results, which included the pension settlement impact:

Operating expense and other income increased 1.8% excluding pension settlement charges. After-tax non-operating adjustments included acquisition-related charges of $1.456B (2023: $1.292B), retirement-related costs of $2.668B (2023: $30M of income), and U.S. tax-reform benefits of $455M (2023: $95M of expense).

Business and geographic performance

Software led growth, with double-digit gains in Red Hat and Automation. Consulting’s reported decline reflected clients reprioritizing discretionary spending amid a dynamic market. Infrastructure was pressured by product-cycle dynamics. Geographic growth varied, particularly in Asia Pacific, where currency-adjusted growth substantially exceeded reported growth.

Cash flow, capital allocation and balance sheet

Operating cash flow benefited from performance-related improvements in net income, partly offset by lower cash provided by financing receivables. Lower acquisition outlays, divestiture proceeds and the sale of certain QRadar SaaS assets contributed to reduced investing outflows; these were partly offset by higher purchases of marketable securities and other investments. Higher debt maturities and lower issuance drove the increase in financing outflows. IBM paid $6.1B in dividends.

IBM completed 11 acquisitions, investing $3.3B to strengthen hybrid cloud and AI capabilities, and increased investment in innovation and talent. Goodwill increased mainly because of the StreamSets and webMethods acquisitions. Divestitures included The Weather Company assets and QRadar SaaS assets.

Diluted weighted-average shares increased 1.6% to 937.2M from 922.1M.

Operating context and risks

Geopolitical tensions, interest-rate volatility, supply-chain vulnerabilities, demographic shifts and evolving cyber threats contributed to client caution on discretionary spending, particularly affecting Consulting. Product-cycle dynamics pressured Infrastructure, while currency movements affected reported revenue and profit.

Business strategy and positioning

IBM’s strategy centers on hybrid cloud and AI, supported by software, consulting, mission-critical infrastructure, research, and ecosystem partnerships. Over the past five years, IBM has shifted toward higher-growth areas; Software and Consulting now represent approximately 75% of its business mix. IBM says more than 90% of executives report moving workloads to hybrid-cloud architectures. It identifies rising technology complexity and costs, talent shortages, and—specifically for AI—model costs, solution complexity, governance, and expertise gaps as client challenges. IBM Consulting estimates that a “hybrid by design” approach can deliver more than three times higher ROI; this is a company-reported estimate.

Portfolio and AI

IBM’s Software portfolio spans four capabilities: Transaction Processing; Automation; Data and AI; and the Red Hat hybrid-cloud platform. Consulting provides strategy, technology implementation, and managed services using IBM products and partner technologies. Infrastructure supports mission-critical hybrid-cloud and AI workloads through IBM Z, Power, Storage, IBM Cloud IaaS, and infrastructure support. Financing helps clients acquire IBM hardware, software, and services following credit evaluation; it is predominantly tied to products or services critical to customers’ operations.

IBM’s AI strategy emphasizes openness, cost efficiency, hybrid deployment, and domain expertise. It promotes its Red Hat AI portfolio for hybrid inference and its smaller open Granite models as lower-cost options. IBM Consulting Advantage is an AI-enabled delivery platform intended to scale solutions and accelerate time to value. IBM also points to internal adoption as evidence of productivity potential: its AskHR assistant resolved 94% of low-level HR inquiries, freeing HR staff to handle more complex work.

Innovation, acquisitions, and partnerships

Research and product development are strategic sources of differentiation. In 2024, IBM introduced Granite 3.0 models and InstructLab, and in quantum computing released the Heron chip and Qiskit 1.0 software development kit. IBM’s stated aim is to turn research into market-ready client solutions, including in hybrid cloud, AI, and quantum computing.

IBM supplements organic innovation with acquisitions and other investments focused on hybrid cloud, data, AI, and consulting. In 2024, it closed acquisitions of Software AG assets to strengthen automation, data, and AI, and Neural Magic to advance optimized generative AI for hybrid cloud. It also announced its intention to acquire HashiCorp to add hybrid multi-cloud infrastructure automation and orchestration capabilities.

Partnerships and cross-portfolio selling are central to IBM’s approach. Strategic partners include Adobe, AWS, Microsoft, Oracle, Palo Alto Networks, Salesforce, SAP, and ServiceNow. IBM’s Partner Plus program is intended to expand partner expertise and client choice. Integrated offerings include Consulting’s Red Hat practice and Consulting Advantage, as well as watsonx Code Assistant for IBM Z to support modernization.

Operating structure and reporting

IBM operates in more than 175 countries through four reportable segments: Software, Consulting, Infrastructure, and Financing. Effective January 1, 2025, it changed revenue categories reported within Software and Consulting, stating that the changes do not affect consolidated financial statements or reportable segments. The filing refers readers to IBM’s 2024 Form 10-K, filed February 25, 2025, for risk factors.

Financing

IBM’s captive Financing business provides client leases, installment plans and loans, generally for terms of up to seven years, primarily to finance IBM hardware, software and services. It also offers short-term working-capital financing to business partners and distributors. IBM says its client and product knowledge helps it manage credit and residual-value risks. Under a revolving agreement, a third-party investor purchases short-term commercial-financing receivables.

Workforce and employee experience

At December 31, 2024, IBM and its wholly owned subsidiaries had 270,300 employees; less-than-wholly owned subsidiaries had 8,900 employees. IBM also estimated 14,200 complementary workers hired under temporary, part-time or limited-term arrangements. IBM operates in more than 175 countries.

IBM’s workforce strategy focuses on hiring, developing and retaining talent. In 2024, efforts emphasized consulting and technical skills and building capacity in strategically important markets. Digital learning and career platforms support employee upskilling and reskilling.

More than 200,000 employees participated in IBM’s 2024 engagement survey. For the fourth consecutive year, more than 80% of participants said they felt engaged at work; nearly 90% said they felt empowered to be their authentic selves. IBM also conducts pay-equity assessments across countries where it has employees.

Employee well-being programs address physical, mental and financial health and include an externally certified health and safety management system. In 2024, IBM made a resilience-building tool and a digital well-being solution available worldwide.

FY2024 results

IBM’s revenue grew modestly, while gross profit and gross margin improved. Software was the main growth engine; Consulting was nearly flat, and Infrastructure, Financing and Other declined.

Revenue increased 1.4% year over year, or 2.5% on a currency-adjusted basis. Gross profit rose 3.6%; the company reported a 1.2-percentage-point expansion in gross margin.

Reportable segments

FY2023 segment results below are recast for the segment changes made in January 2024. Segment gross margins are shown alongside revenue.

Software revenue grew 8.3% (9.0% currency-adjusted), supported by organic investment, higher contributions from Apptio, StreamSets and webMethods, demand for generative-AI products, and growth in recurring and transactional software. Consulting revenue declined 0.9% (up 0.6% currency-adjusted); Infrastructure fell 3.9% (down 2.7% currency-adjusted), Financing fell 3.7% (down 2.5% currency-adjusted), and Other fell 61.6% (down 61.7% currency-adjusted).

Software revenue detail

Hybrid Platform & Solutions grew 8.1% (8.7% currency-adjusted), and Transaction Processing grew 8.7% (9.6% currency-adjusted). Within Software, Red Hat grew 11.4% (12.0% currency-adjusted), Automation 14.2% (14.8%), Data & AI 1.6% (2.2%), and Security 0.8% (1.5%).

Hybrid-cloud demand reflected clients’ focus on application modernization, IT-spending optimization and reducing operational complexity with OpenShift and Ansible. Both offerings had double-digit growth, while RHEL grew at a high-single-digit rate. OpenShift annual recurring revenue reached $1.4B exiting FY2024, with OpenShift Virtualization engagements also contributing to growth. Automation benefited from SaaS offerings, including AIOps and Management, and from Apptio. Data & AI growth included Data Fabric and the Customer Care AI assistant. Security growth in data security and identity/access management was partly offset by a decline in security threat management.

IBM cited strong demand for generative-AI offerings including watsonx, Concert and AI assistants, and launched next-generation watsonx Code Assistant and Guardium Quantum Safe in Q4 FY2024.

IBM revised its reportable segments and segment-performance metric in Q1 2024 and recast prior-year segment results. Planned changes to Software and Consulting revenue categories beginning in Q1 2025 are not expected to affect consolidated financial statements or reportable segments.

IBM FY2024 — Management discussion

Segment results

*Software segment revenue is not stated in the chunk summaries. Software: Hybrid Platform & Solutions ARR reached $15.3B exiting FY2024 and grew at a double-digit rate. ARR is a run-rate measure based on current-quarter recurring revenue multiplied by four, not recognized revenue or a guarantee of future revenue. Transaction Processing revenue was $8.277B, up 8.7% reported (9.6% currency-adjusted), supported by client capacity needs, renewals and generative-AI products. Software gross margin rose to 83.7% from 82.9%, and segment margin to 32.1% from 30.0%, as operating leverage and productivity gains more than offset portfolio investment.

Consulting: Revenue declined 0.9% reported but rose 0.6% currency-adjusted. Business Transformation revenue was $9.347B from $9.179B (+1.8% reported; +3.2% adjusted); Technology Consulting was $3.653B from $3.775B (−3.2%; −1.5% adjusted); and Application Operations was $7.692B from $7.930B (−3.0%; −1.5% adjusted). Clients favored digital transformation and AI for cost optimization and efficiency, while application development and on-premise customized work were weaker; cloud modernization partly offset the decline. Signings rose 3.3% to $25.103B from $24.305B (4.7% adjusted); trailing-12-month book-to-bill was 1.21, with strongest signings growth in Q4, aided by generative-AI offerings. Red Hat consulting and partnership-generated revenue each grew at double-digit rates; Red Hat generated approximately $3B of FY2024 revenue across Consulting. IBM invested in skills and capabilities and acquired Oracle services provider Accelalpha in Q4. Gross margin improved to 27.0% from 26.8%, but segment margin declined to 9.9% from 10.2% as skills investment partly offset productivity gains.

Infrastructure: Revenue fell 3.9% reported (2.7% adjusted), reflecting product-cycle dynamics. Hybrid Infrastructure revenue was $8.913B from $9.215B (−3.3%; −2.3% adjusted): IBM Z declined 10.0% reported (8.9% adjusted), while Distributed Infrastructure grew 1.6% (2.6% adjusted), led by double-digit Storage growth and partly offset by lower cloud-platform revenue. Infrastructure Support revenue was $5.107B from $5.377B (−5.0%; −3.4% adjusted), amid lower support for non-IBM equipment and product-cycle effects. At year-end, z16 was in its eleventh quarter; installed MIPS had grown more than 30% program-to-date, and total z16 program revenue had outpaced prior Z cycles. IBM introduced storage innovations for capacity scaling and AI workloads. Gross margin eased to 55.8% from 56.1%, and segment margin fell to 17.5% from 19.4%, reflecting product-cycle pressure and investment in Z, Power, Storage and AI capabilities; higher IP/custom-development income partly offset the impact.

Geographic revenue

Total revenue grew 1.4% reported (2.5% currency-adjusted). EMEA rose 5.1% and Asia Pacific 3.0%, while the Americas declined 1.3%. Germany grew 14.5% reported and Japan 7.6% (16.2% adjusted); China declined 7.2% and Brazil 9.4%.

Expenses, retirement costs and earnings factors

Total expense and other income increased 16.2% to $29.754B from $25.610B, chiefly because of $3.1B in pension settlement charges, alongside higher strategic investment and workforce-rebalancing costs. Operating (non-GAAP) expense and other income rose 1.8% to $25.068B from $24.620B; the ratio to revenue was 39.9% versus 39.8%, while the GAAP ratio was 47.4% versus 41.4%. SG&A was $19.688B from $19.003B (+3.6%); workforce-rebalancing charges rose to $696M from $438M. RD&E increased 10.4% to $7.479B from $6.775B, with investment in AI, hybrid cloud, quantum and infrastructure ahead of the next IBM Z cycle in 2025. Total pre-tax stock-based compensation was $1.311B, up $178M: $223M in cost (up $33M), $690M in SG&A (up $74M) and $398M in RD&E (up $70M), primarily reflecting annual executive and employee awards.

Other expense shifted to $1.871B of expense from $914M of income, mainly due to retirement-related costs of $3.457B versus $39M of income, including pension settlement and actuarial-loss effects. Offsets included a $349M QRadar SaaS asset-sale gain, $243M of Weather Company divestiture gains and higher interest income. Interest expense was $1.712B from $1.607B (+6.5%); total interest expense excluding capitalized interest was $2.048B, up $108M, primarily due to higher average rates. IP and custom-development income rose 15.9% to $996M from $860M, including semiconductor-related joint-development and licensing activity with a Japanese consortium. IP income was $329M from $374M, while custom-development income rose to $667M from $485M.

Total pre-tax retirement-related plan cost rose to $4.478B from $1.149B, primarily due to the pension settlement charges. Operating retirement costs declined 14.0% to $1.021B from $1.188B: a $551M reduction in defined-contribution plan cost to $440M more than offset service cost rising $385M to $568M. Recognized actuarial losses increased to $967M from $508M. The overall retirement and postretirement plans’ net underfunded position improved $1.348B to $2.657B, mainly on higher discount rates. Worldwide qualified defined-benefit plans were 116% funded at year-end; required 2025 contributions to qualified defined-benefit and multi-employer plans are expected to be $100M. The U.S. Personal Pension Plan was 136% funded, with a 2.6% asset return; global asset returns were 2.0%. The FY2024 continuing-operations effective tax rate was (3.8)% versus 13.5%, primarily because of pension-settlement tax effects and resolution of tax audits; the operating effective tax rate was 13.6% versus 14.0%.

Cash, debt and working capital

Free cash flow rose $1.538B despite lower operating cash flow. IBM spent $3.289B on acquisitions and returned $6.147B through dividends. Management said cash generation supports investment in innovation and expertise while returning capital to shareholders. Improved working capital reflected growth in cash and short-term financing receivables and lower current liabilities, mainly from debt maturities.

IBM — 2024 financial position and cash flow

Receivables credit losses

The allowance declined by $18M from net releases, $146M of write-offs, and a $21M reduction from foreign currency and other items. Excluding receivables held for sale, provision coverage was 1.4% at year-end, down 80 basis points year over year, mainly because previously reserved uncollectible balances were written off. About $60M of write-offs related to previously reserved receivables from discontinued operations.

Assets, liabilities, and debt

Noncurrent assets increased $360M as reported, or $2.453B adjusted for currency, primarily due to goodwill from the StreamSets and webMethods acquisitions, partly offset by currency effects. Long-term debt decreased $237M as reported but increased $761M adjusted for currency: upcoming maturities reclassified to short-term debt and currency effects were partly offset by first-quarter debt issuance. Noncurrent liabilities excluding debt declined $1.629B as reported, or $337M adjusted for currency, mainly because retirement and postretirement benefit obligations fell.

Total debt declined $1.574B as reported ($536M adjusted for currency). Maturities of $6.615B exceeded issuance proceeds of $5.705B. Non-Financing debt fell primarily due to maturities; Financing segment debt increased, reflecting greater funding needs for financing receivables. Financing’s debt-to-equity ratio remained 9.0:1. Its debt primarily funds IBM client assets and is largely composed of intercompany loans structured to substantially match financing receivables’ terms, currencies, and interest-rate variability.

Equity

Total equity increased $4.780B during 2024. The increase included $6.023B of net income—which included $2.407B of after-tax pension settlement charges—a $3.492B reduction in accumulated other comprehensive loss, primarily related to retirement benefit plans, and a $1.737B increase in common stock. These were partly offset by $6.147B of dividends paid.

Cash flow

Operating cash flow declined, reflecting lower cash provided by financing receivables, partly offset by performance-related improvement within net income. Investing outflow narrowed mainly because FY 2023 included the Apptio acquisition; FY 2024 also benefited from divestiture proceeds, including The Weather Company assets, and dispositions of property, equipment, and other assets, including certain QRadar SaaS assets. These benefits were partly offset by the StreamSets and webMethods acquisitions and higher purchases of marketable securities and other investments. Financing outflow increased largely because net cash provided by debt declined $5.377B, with lower issuance and higher maturities.

Continuing operations — FY2024 results

GAAP gross profit increased 3.6% year over year, while GAAP income from continuing operations declined 20.0% and diluted EPS fell 21.2%. On the operating non-GAAP basis, gross profit rose 3.8%, continuing-operations income increased 9.2%, and diluted EPS grew 7.4%. Operating gross margin expanded 1.3 percentage points and operating pre-tax margin increased 1.2 points.

GAAP-to-operating differences and taxes

The substantial gap between 2024 GAAP and operating results chiefly reflects retirement-related charges and tax effects. Operating results exclude $3.457B of retirement-related pre-tax adjustments, including $3.1B of pension settlement charges ($2.4B net of tax). The total retirement adjustment to continuing-operations income was $2.668B after tax, or $2.85 per diluted share.

Acquisition-related adjustments increased operating pre-tax income by $1.953B and continuing-operations income by $1.456B, or $1.55 per diluted share. The tax adjustment reduced operating income by $455M ($0.49 per diluted share), primarily because GAAP results included a benefit from resolving certain tax audit matters. Acquisition-related foreign-exchange derivative impacts were a $68M loss in 2024, compared with a $12M gain in 2023.

The GAAP tax rate shifted largely because of the tax-audit resolution benefit; the operating effective tax rate was comparatively stable.

Prior-year reconciliation context

In 2023, retirement-related adjustments were $(39)M pre-tax and $(30)M after tax, or $(0.03) per diluted share. Acquisition-related adjustments contributed $1.660B of pre-tax income and $1.292B of continuing-operations income ($1.40 per diluted share). U.S. tax reform impacts increased operating income by $95M ($0.10 per diluted share).

Operating earnings are management’s non-GAAP measure. The large 2024 difference from GAAP earnings is principally attributable to pension settlement charges and the discrete tax benefit, and the measure may not be comparable with similarly titled measures at other companies.

FY2023 results and segment performance

FY2023 segment results are recast for IBM’s segment changes effective Q1 2024; consolidated results were unchanged. Revenue increased 2.2% reported (2.9% currency-adjusted). Gross profit grew faster than revenue, lifting gross margin by 1.4 percentage points. Adding acquired-intangible amortization, non-GAAP operating gross profit grew 4.7% and operating gross margin expanded to 56.5%.

Software

Software revenue rose 5.8% reported (5.9% currency-adjusted); recurring revenue represented approximately 80% of annual revenue. Gross profit increased to $20.721B from $19.483B, with gross margin up 0.4 points to 82.9%. Segment profit rose 6.9%, and margin increased 0.3 points to 30.0%. Revenue growth and productivity supported profit, partly offset by innovation investment; currency reduced segment margin by approximately 1 point.

Hybrid Platform & Solutions grew 5.7% reported (5.8% currency-adjusted). Red Hat grew 9.1% reported, with double-digit growth in OpenShift and Ansible; OpenShift ARR reached $1.2B and Hybrid Platform & Solutions ARR was $13.8B exiting FY2023. Automation grew 3.4% and Data & AI 6.0%, while Security declined 1.4%. Transaction Processing grew on IBM Z workloads and price increases.

Consulting

Consulting revenue grew 4.1% reported (5.6% currency-adjusted), across all business areas. Demand focused on data and technology transformation, AI and analytics, cloud modernization, and application development. Strategic partnerships—about 40% of Consulting revenue—delivered double-digit growth. Gross profit rose to $5.588B from $5.180B, and gross margin increased 0.9 points to 26.8%. Segment profit grew 13.8%, with margin up 0.9 points to 10.2%; pricing and productivity gains were partly offset by higher labor costs.

Infrastructure

Infrastructure revenue declined 4.5% reported (3.9% currency-adjusted), reflecting product-cycle dynamics. Hybrid Infrastructure revenue fell to $9.215B from $9.451B; IBM Z declined 4.5% as z16, launched in Q2 2022, moved through its cycle. Management said z16’s year-end performance significantly outperformed prior cycles, including z15, and installed MIPS doubled across the last two IBM Z cycles. Distributed Infrastructure declined 1.0%, as weakness in high-end Power and cloud platforms was partly offset by growth in high-end Storage and low- to mid-range Power. Infrastructure Support revenue fell 7.9% as product cycles reduced support demand.

Despite lower revenue, gross profit increased to $8.187B from $8.076B and gross margin expanded 3.3 points to 56.1%. Segment profit rose 5.9%, with margin up 1.9 points to 19.4%. Productivity, supply-chain streamlining, IP and custom-development income, and a server and network-equipment useful-life change supported results; currency contributed approximately 1 point to segment margin.

Financing and Other

Financing revenue grew 14.8% reported (15.0% currency-adjusted), primarily as client-financing revenue rose $89M to $728M on higher asset yields. Segment profit increased 9.8%, although margin declined 2.3 points to 50.3%; lower SG&A and settlements on non-accrual assets supported profit. Other revenue fell 30.5%, and its gross margin deteriorated to −87.4% from −32.9%.

Strategy, portfolio and growth priorities

IBM is positioning itself as a more focused, higher-growth, software-led integrated platform company. Its strategy combines AI, hybrid cloud and infrastructure to bring AI to enterprise data and support mission-critical workloads. IBM sees enterprise AI moving from experimentation to scaled deployment, as clients pursue measurable returns through productivity, automation, lower costs and new revenue opportunities. It is embedding AI across Software, Infrastructure, Consulting and Transaction Processing, including watsonx, Red Hat OpenShift AI and RHEL AI, watsonx Code Assistant for Z, real-time AI inferencing on IBM Z, and the IBM Consulting Advantage delivery platform.

IBM is also emphasizing open-source capabilities and partnerships. In Q2 2024, it open-sourced its Granite AI models, which it describes as purpose-built and more cost-efficient than larger alternatives. IBM and Red Hat launched InstructLab to help evolve and improve AI models. In August 2024, IBM completed the sale of certain QRadar SaaS assets to Palo Alto Networks as part of a partnership to deliver AI-powered security solutions using watsonx.

Portfolio actions are intended to focus IBM’s business while adding capabilities complementary to its platform. IBM closed the divestiture of The Weather Company assets in January 2024 and completed 11 acquisitions during 2024. The StreamSets and webMethods assets acquired from Software AG add integration, API management and data-ingestion capabilities; Neural Magic, acquired at year-end, strengthens AI performance engineering and model optimization.

IBM’s proposed acquisition of HashiCorp, announced April 24, 2024, covers all outstanding shares for $35 per share in cash, at an approximate $6.4 billion enterprise value. HashiCorp stockholders approved the merger on July 15, 2024. IBM expected closing in Q1 2025, subject to regulatory approvals and customary conditions; approval and closing remained outstanding at the time of the filing. IBM plans to integrate HashiCorp into Software to combine capabilities for managing application and infrastructure complexity and build an end-to-end hybrid-cloud platform for the AI era.

IBM expanded its Poughkeepsie, New York, Quantum Data Center and opened its first Quantum Data Center in Europe in 2024. It also partnered with the State of Illinois to establish the National Quantum Algorithm Center in Chicago and deploy a next-generation IBM Quantum System Two, advancing its quantum-centric supercomputing ambitions.

Reporting changes and retirement outlook

Effective January 1, 2025, IBM changed the revenue categories it reports within Software to Hybrid Cloud (Red Hat), Automation, Data and Transaction Processing, and within Consulting to Strategy and Technology and Intelligent Operations. The changes are intended to better reflect market opportunities and how IBM addresses them; they do not affect consolidated financial statements or reportable segments. The 2024 Annual Report retains the historical category presentation.

Worldwide qualified retirement plans were 116% funded at year-end 2024, and U.S. qualified plans were 136% funded. IBM expects 2025 contributions of approximately $1.3 billion, approximately flat versus 2024, including $0.1 billion of legally required contributions to non-U.S. defined-benefit and multi-employer plans.

Estimated 2025 pre-tax retirement-related plan cost is approximately $1.1 billion: operating cost of approximately $1.0 billion, essentially flat year over year, and non-operating cost of approximately $0.1 billion, down approximately $3.3 billion from 2024. The lower non-operating cost primarily reflects $3.1 billion of pension-settlement charges associated with U.S. and Canada pension transfers in 2024, as well as lower recognized actuarial losses.

Management outlook

IBM characterizes 2024 as progress toward a more focused, higher-growth, software-led integrated platform company, citing sustained revenue growth, strong cash generation and returns to stakeholders. Management says the company is positioned for 2025 and beyond.

Liquidity and cash flows

IBM’s liquidity remained substantial in FY2024, although operating cash flow declined from FY2023.

Management uses free cash flow to assess operating performance, shareholder returns, strategic investment and debt-service capacity, while noting that it is not necessarily fully available for discretionary spending. IBM defines free cash flow as operating cash flow less the change in financing receivables and net capital expenditures, including software investment and adjusted for asset sales, including certain QRadar SaaS assets. Because financing receivables support returns and growth in the Financing business, IBM views them as profit-generating investments rather than working capital to minimize; it also presents operating cash flow and free cash flow excluding their effects.

Debt, ratings and covenants

Debt declined $1.6B during FY2024, primarily reflecting currency effects and $6.6B of maturities, partly offset by $5.7B of debt issuance. In Q1 2025, IBM issued $8.4B of debt for general corporate purposes, including future maturities and capital-allocation priorities.

Ratings were unchanged from year-end 2023. Senior long-term debt was rated A- by S&P, A3 by Moody’s and A- by Fitch; commercial paper was rated A-2, Prime-2 and F1, respectively. IBM said its liquidity and cash flows support operating at a single-A rating.

Debt agreements limit secured indebtedness and sale-and-leaseback transactions to 10% of consolidated net tangible assets. Credit facilities require a consolidated net interest expense ratio of at least 2.20:1 and include cross-default provisions for other defaulted indebtedness of at least $500M. IBM reported compliance with significant covenants; noncompliance could accelerate applicable principal and interest.

Debt covenants have no ratings-trigger provisions. However, derivative agreements may permit termination if IBM falls below investment grade. At December 31, 2024, related instruments in a liability position had a $726M fair value before applicable netting; the amount is subject to market and outstanding-position fluctuations.

Cash generation and deployment

Management-reported free cash flow rose $1.5B, or about 13.4%, in FY2024. IBM attributed the increase primarily to performance-related improvement within net income and lower cash requirements from retirement-plan changes.

FY2024 operating cash flow and net capital expenditures included $0.1B and $0.4B, respectively, of proceeds from the sale of certain QRadar SaaS assets. IBM said the sale’s net benefit to current-year cash flow was nominal after structural-action payments and foregone QRadar profits. In Q2 2024, IBM increased its quarterly common dividend from $1.66 to $1.67 per share.

Contractual obligations

Total scheduled contractual payments were $95.582B.

The settlement timing for the remaining tax reserves cannot be reasonably estimated, and IBM does not expect them to be due within 12 months.

Pension funding and liquidity

IBM contributed $79M to non-U.S. defined-benefit plans in FY2024, compared with $70M in FY2023. Mandated minimum contributions to certain non-U.S. plans are estimated at about $0.7B over the next five years, including about $100M in 2025. Contributions to all retirement-related plans are expected to be about $1.3B in 2025, approximately flat with FY2024; no U.S. defined-benefit pension contribution is legally required in 2025. Adverse capital-market performance or changes in funding rules could increase required non-U.S. contributions.

Management said cash flows are sufficient to fund operations and obligations, including investment, dividends, and debt service. IBM also cited borrowing at reasonable rates and committed global credit facilities as additional liquidity options. Operating results, geographic sources of cash, litigation, and tax-payment timing may cause temporary cash-flow variability. IBM reported no off-balance-sheet arrangements with a material current or reasonably likely future effect on its financial condition, results, or liquidity.

Critical estimates, assumptions, and risks

IBM’s reported results and financial position depend on estimates involving pensions, contract accounting, taxes, goodwill valuation, financing credit losses, and litigation.

Pension assumptions

At December 31, 2024, the discount rate for the U.S. Qualified PPP and Excess Personal Pension Plan increased 50 basis points to 5.5%. IBM estimates that this change will increase 2025 pre-tax income by $104 million. The disclosed sensitivities are:

The discount-rate sensitivities include a similar change in the interest-crediting rate. Beginning in 2024, changes to the Qualified PPP link the interest-crediting rate and expected return on plan assets to the plan discount rate. Actual investment returns, demographic experience, or other outcomes that differ from assumptions could change pension expense and future funding needs. Changes in the projected benefit obligation (PBO) could also affect funding decisions if obligations exceed plan assets.

Revenue and service-contract estimates

Accounting for complex or nonstandard contracts requires judgment about performance obligations, standalone selling prices, whether IBM acts as principal or reseller, contract combinations, collectibility, and variable consideration such as rebates, penalties, and bonuses. A 10% change in relevant 2024 estimates would have affected net income by $31 million; the disclosed estimate does not specify the direction of the effect.

Service-contract profitability depends on estimates of remaining labor and product costs and expected productivity, particularly for cost-to-cost contracts. When a contract is expected to be loss-making, IBM recognizes the full estimated remaining loss immediately in cost. Contract-loss provisions were immaterial at December 31, 2024 and 2023.

Taxes

Tax liabilities and deferred-tax-asset valuation allowances depend on estimates of tax-authority outcomes, future taxable income, and tax-planning actions. Settlements, tax-law changes, and the geographic mix of income can change the tax provision. A 1% change in the tax provision relative to income from continuing operations before taxes would have changed 2024 consolidated net income by $58 million in the opposite direction.

Goodwill and other valuation judgments

IBM’s fourth-quarter 2024 quantitative goodwill impairment test resulted in no impairment charge; the fair value of every reporting unit substantially exceeded its carrying value. Valuations depend on projected cash flows and assumptions including revenue growth, margins, discount and terminal growth rates, capital expenditures, and tax rates. Adverse changes in assumptions or circumstances could affect valuations.

Financing credit risk and litigation

A 10% difference between actual collectibility and estimated losses would change Financing segment profit and income from continuing operations before taxes by an estimated $13 million—higher if collectibility is better than estimated and lower if worse. Significant economic deterioration, or a sudden change in the health of a concentrated client, could make actual losses materially different from the allowance.

IBM reviews significant claims and proceedings quarterly and accrues losses when they are probable and reasonably estimable. Revised estimates as new information emerges could materially affect results or financial position.

Currency rate fluctuations

IBM’s continuing-operations revenue grew 1.4% as reported in FY2024, versus 3.0% at constant currency in FY2024, a 1.6 percentage-point currency headwind. Currency translation and hedging affected FY2024 year-over-year growth in pre-tax income and operating (non-GAAP) pre-tax income by approximately $100 million; the effect on segment profit-margin growth was immaterial. IBM characterized these amounts as the theoretical maximum impact on reported results.

IBM does not hedge all currency exposures. Its hedging program defers, rather than eliminates, currency-related volatility. The timing of hedges, exchange-rate movements, and operational responses make the impact in future periods difficult to predict. At December 31, 2024, currency changes meant that assets and liabilities denominated in most local currencies translated into fewer U.S. dollars than at year-end 2023.

Constant-currency growth is a mathematical adjustment and does not reflect operational actions management might take to mitigate currency movements. For non-U.S. subsidiaries and branches that operate in U.S. dollars or in highly inflationary economies, IBM generally manages currency risk by linking prices and contracts to U.S. dollars.

Market risk

At December 31, 2024, IBM’s modeled sensitivity to a hypothetical 10% adverse move in interest rates was approximately $0.3B of lower fair value of financial instruments, unchanged from December 31, 2023. A hypothetical 10% adverse foreign-exchange move against the U.S. dollar would reduce fair value by approximately $1.3B, compared with $1.6B in 2023. The decrease primarily reflected foreign-currency activity related to long-term debt and derivatives.

IBM manages interest-rate and currency exposures partly through derivatives, including swaps, forwards, and options. These sensitivities are not forecasts of actual losses: they hold other variables constant and exclude items such as lease receivables, forecast foreign-currency cash flows, and IBM’s net investment in foreign operations. As a result, changes in hedging instruments may not be matched by modeled changes in the exposures they hedge. IBM states it does not anticipate material losses from these risks.

Financing segment

Financing revenue and profit declined in FY2024, primarily because of lower used-equipment sales. Revenue fell 3.7% year over year (2.5% excluding currency), while profit declined 6.6%; the segment’s profit margin contracted 1.5 percentage points.

*Prior-year margin implied by the reported 1.5-percentage-point decline.

At December 31, 2024, segment assets were lower than a year earlier, while equity increased slightly and segment debt—primarily intercompany loans—increased.

The $12.528B of external receivables comprised $10.294B of client financing receivables—$3.490B net investment in sales-type and direct-financing leases and $6.804B of client loans—plus $2.217B of commercial financing receivables and $17M of other receivables. Commercial financing receivables included $1.317B held for investment and $0.900B held for sale.

Financing receivables and credit quality

At December 31, 2024, IBM’s external Financing receivables had lower amortized cost and a lower credit-loss allowance than a year earlier. Allowance coverage fell to 1.1% from 1.3%, primarily because forward-looking economic indicators improved. Approximately 74% of the external portfolio was with investment-grade clients, up 2 percentage points year over year; IBM’s measure reflects client credit ratings and mitigating actions to reduce risk.

External receivables exclude held-for-sale and immaterial miscellaneous receivables.

Financing segment returns

Financing after-tax segment profit declined, and IBM attributed the lower return on equity to decreased net income. The 2023 figures were recast for segment changes made in January 2024.

Lease residual values

Unguaranteed residual value on sales-type and direct financing leases increased to $479M at December 31, 2024, from $458M a year earlier. IBM expected the 2024 balance to run out as follows:

Unguaranteed residual value on operating leases was not material at either year-end.

Report of Management

IBM management concluded that its internal control over financial reporting was effective as of December 31, 2024, based on an evaluation using the COSO Internal Control–Integrated Framework (2013). PricewaterhouseCoopers LLP audited IBM’s consolidated financial statements and the effectiveness of its internal controls. IBM describes ongoing internal audit and control procedures, overseen by an Audit Committee composed solely of independent, non-management directors. The section reports no material control weakness.

Management cautions that controls provide reasonable, not absolute, assurance and may become inadequate or be followed less consistently as conditions change. This section contains no financial results, operating metrics, or business-strategy developments.

Independent auditor’s report

PwC issued unqualified opinions on IBM’s consolidated financial statements for each of the years ended December 31, 2022, 2023, and 2024. PwC also concluded that IBM maintained effective internal control over financial reporting as of December 31, 2024.

Critical audit matter: income taxes and uncertain tax positions

PwC identified income taxes and uncertain tax positions as a critical audit matter. At December 31, 2024, IBM reported $8.9 billion of unrecognized tax benefits. Estimating these amounts requires complex judgments about tax law and uncertain outcomes from audits and settlements in the United States and foreign jurisdictions; those uncertainties could result in significant adjustments.

PwC’s audit procedures included testing relevant controls and calculations, evaluating tax positions across jurisdictions, assessing whether identified exposures were complete, and reviewing the status and results of tax audits. The work involved tax specialists.

FY2024 results

Revenue rose 1.4%. Services revenue declined 1.9%, while Sales revenue increased 4.8%; Financing revenue also declined. Gross profit increased 3.6%, and gross margin improved to approximately 56.7% from 55.5%. Despite the stronger gross profit, higher SG&A and R&D expenses and the swing in other income/expense to an expense weighed on pretax income, which fell 33.3%. A $218M income tax benefit, compared with a $1.176B provision in FY2023, contributed to continuing-operations income of $6.015B. FY2024 net income includes a $3.113B pension settlement charge; FY2022 included a $5.894B pension settlement charge.

Comprehensive income

Cash flow and investment

Cash, cash equivalents and restricted cash increased from $13.089B at the start of FY2024 to $14.160B at year-end. Cash dividends per common share were $6.67, versus $6.63 in FY2023.

Balance sheet and capital

Total equity increased by $4.780B during FY2024, with comprehensive income partly offset by dividends and other equity movements. Debt remained substantial relative to cash, and tangible equity was negative.

Shares outstanding were approximately 915.014M at the start of FY2024 and 926.290M at year-end.

IBM FY2024 financial-statement summary

Results and segments

IBM’s consolidated revenue increased 1.4%, with growth concentrated in Software. Higher segment profit was more than offset at the pretax level by unusually large pension-settlement costs.

Net income included $6.015B from continuing operations and $8M from discontinued operations in 2024. Diluted continuing-operations EPS was $6.42 in 2024, $8.15 in 2023, and $1.95 in 2022.

Software’s 8.3% revenue growth and 15.8% profit growth drove segment performance. Consulting and Infrastructure declined in both revenue and profit; Infrastructure’s server and maintenance declines were partly offset by storage growth. Segment profit margin overall increased to 21.7% from 21.0%.

Segment profit reconciled to continuing-operations pretax income of $5.797B in 2024 and $8.690B in 2023. Major deductions included acquired-intangible amortization of $1.830B/$1.627B; stock-based compensation of $1.311B/$1.133B; net interest excluding Financing of $984M/$973M; and workforce-rebalancing charges of $692M/$435M. Retirement-related costs were $3.457B in 2024 versus $39M of income in 2023. The reconciliation also included divested-business benefits of $234M/$83M and unallocated corporate amounts and other of $425M/$(59)M.

Pension, acquisitions and divestitures

IBM transferred approximately $6.0B of U.S. pension obligations and related plan assets to Prudential in September 2024, covering about 32,000 participants, and approximately $1.2B of Canadian obligations and assets in October. Funded from plan assets, the transfers required no additional company contributions and reduced future contribution risk. They generated noncash pretax settlement charges of approximately $2.7B and $0.4B, respectively (about $3.1B total; $2.4B after tax). A 2022 transfer of approximately $16B generated a $5.9B pretax charge.

Worldwide qualified pension plans were 116% funded at year-end. Net funded status improved to $(2.657)B from $(4.006)B; the U.S. Qualified Personal Pension Plan was overfunded by $4.651B. Effective January 2024, IBM replaced 401(k) Plus contributions for most eligible U.S. employees with a pension-plan Retirement Benefit Account, increasing pension service cost.

IBM completed 11 acquisitions for $3.515B of consideration, including the $2.259B cash acquisition of StreamSets and webMethods, which added $1.074B of goodwill. The announced HashiCorp acquisition had a $6.4B enterprise value. IBM sold The Weather Company assets for $1.1B including contingent consideration, receiving $750M cash and providing a $100M seller-financed loan; it recorded a $243M pretax gain. The divested businesses contributed $35M of 2024 revenue versus $397M in 2023. IBM also sold QRadar SaaS assets for $500M and recorded a $349M pretax gain.

Balance sheet, debt and cash-generating commitments

Other-than-goodwill intangibles comprised capitalized software $790M, client relationships $5.317B, completed technology $3.132B, patents and trademarks $1.307B, and other intangibles $114M. No goodwill or intangible impairment was recorded in 2024 or 2023. Consolidated assets rose while goodwill additions, mainly from acquisitions, were partly offset by $464M of Weather Company goodwill derecognition.

Long-term debt including current maturities was $54.943B, with estimated fair value of $47.389B. FY2024 interest expense was $1.712B, up from $1.607B; interest paid and accrued was $2.060B versus $1.949B. IBM issued $5.5B of fixed-rate notes through its finance subsidiary and amended $10B of revolving credit agreements, extending maturities to 2027 and 2029; none were drawn at year-end. The minimum consolidated net interest expense covenant ratio is 2.20:1; IBM reported compliance.

Remaining performance obligations were approximately $63B, with about 67% expected to be recognized within two years and 29% in years three to five. Current and noncurrent deferred income totaled $17.529B versus $16.984B. FY2024 revenue recognized from the prior year-end deferred-income balance was $11.0B. IBM sold $4.2B of trade receivables without recourse during 2024, versus $3.4B in 2023.

Taxes, earnings quality and shareholder dilution

The 2024 tax benefit reflected pension settlements and resolution of certain tax audits; the effective tax rate was (3.8)%, versus 13.5% in 2023. Unrecognized tax benefits were $8.875B, of which $8.258B could favorably affect the effective tax rate if recognized. Proposed IRS adjustments related to cross-border transactions in 2013 and 2015 could increase taxable income by approximately $4.2B and $1.2B, respectively; IBM disputes both. The IRS audit of 2017–2018 returns was expected to conclude in 2025.

At year-end 2024, 926.29007M common shares were outstanding. Awards included 21.064M RSUs, 3.302M PSUs and 10.005M options; unrecognized compensation cost was $1.9B, expected to be recognized over about 2.5 years. FY2024 OCI was a $3.492B gain, primarily reflecting retirement-plan effects; accumulated other comprehensive loss improved to $15.269B from $18.761B.

IBM’s accounting relies on estimates for long-term contract costs and productivity, contract-cost recoverability, goodwill and asset impairment, pension assumptions, and credit losses. Revenue timing and gross-versus-net presentation also depend on contract terms and principal-versus-agent judgments.

Pension investment strategy and assets

In 2024, IBM increased return-seeking assets and reduced debt securities in response to newly accruing Retirement Benefit Account (RBA) liabilities in the Qualified PPP. Investment risks include inflation, equity volatility and interest-rate changes, which could worsen underfunding and increase IBM’s reliance on contributions. Non-U.S. allocations may vary with local rules and governance.

Defined benefit plan assets at fair value declined in 2024. Investments measured using the NAV practical expedient are shown separately.

Qualified PPP private-market assets totaled $1.465B at year-end 2024, including less-liquid private equity, real estate and infrastructure equity; an additional $843M was committed for future private-market investments, expected to be funded from plan assets. IBM uses derivatives for fixed-income and interest-rate management, credit exposure, cash equitization and currency strategies.

Funded status

Underfunding remains material in some pension and postretirement plan groups.

Contributions, benefit payments and outlook

The decline in defined-contribution contributions primarily reflects the RBA’s introduction on January 1, 2024. IBM expects approximately $100M of 2025 contributions to non-U.S. defined-benefit and multi-employer plans, generally at mandated minimum levels. No 2025 U.S. defined-benefit contribution is legally required, although IBM may contribute at its discretion. Market performance could increase required contributions in countries that frequently remeasure funded status.

Unfunded 2025 payments are reflected in current compensation-and-benefits liabilities.

Subsequent events

On January 28, 2025, IBM’s board approved a quarterly dividend of $1.67 per share, payable March 10. On February 10, IBM issued $3.6B of euro fixed-rate notes with 5–20-year maturities and 2.9%–3.8% coupons, and $4.75B of U.S.-dollar fixed-rate notes with 3–30-year maturities and 4.65%–5.7% coupons.

Cumulative total returns

The performance graph assumes a $100 investment at the start of each period, with all dividends reinvested.

In 2024, IBM’s index was $117.81 in March, fell to $107.77 in June, and recovered to $138.96 in September, before ending the year at $139.27. IBM outperformed both comparison indices over three years; over five years it exceeded the S&P 500 but trailed the technology index. IBM notes that the five-year comparison includes the effect of its 2021 Kyndryl separation, reflected in cumulative total return through reinvested dividends.

IBM common stock trades on the New York Stock Exchange and NYSE Chicago under the ticker symbol IBM. The 2025 Annual Meeting of Stockholders is scheduled for April 29, 2025, at 1:00 p.m. ET. IBM’s investor website provides SEC filings free of charge after they are filed, along with other investor information. The Computershare Investment Plan offers dividend reinvestment, direct stock purchases, and safekeeping of stock certificates.