IBM 10-K 2025-12-31 section summaries

IBM’s strategy and positioning

IBM’s strategy centers on hybrid cloud and AI, combining software, consulting, and mission-critical infrastructure to help clients transform workflows, modernize applications, and improve agility and operational efficiency. IBM points to its research capabilities, enterprise relationships, industry and technology expertise, global reach, and partner ecosystem as differentiators. It is also positioning quantum computing as a potential future business opportunity.

IBM works with hyperscalers, service providers, systems integrators, and software and hardware vendors, including Adobe, AWS, Microsoft, Oracle, Palo Alto Networks, Salesforce, Samsung Electronics, and SAP. Some partnerships are with competitors, creating a coopetitive environment.

Competitive environment

Competition is intense across IBM’s businesses, involving large multinational providers and niche firms, and is evolving as the company pursues hybrid cloud and AI. IBM identifies innovation, performance, price, quality, talent, client trust and relationships, breadth of offerings, and service and support as important competitive factors. It says portfolio optimization, organic and inorganic innovation, and resource allocation matter to maintaining its position.

• Software: Competes with Alphabet/Google, Amazon, BMC, Broadcom, Microsoft, Oracle, Salesforce, SAP, Splunk (a Cisco company), and regional or product-focused specialists. IBM emphasizes its hybrid-cloud and AI platforms, global reach, industry expertise, and research capabilities.
• Consulting: Competes with global consulting and technology firms, India-based service providers, accounting-firm consulting practices, engineering providers, and niche specialists. Its positioning draws on industry expertise, hybrid cloud, data and AI capabilities, IBM technology, and ecosystem partners.
• Infrastructure: Offers on-premises and cloud-based servers and storage, emphasizing security, scalability, reliability, mission-critical and AI workloads, and lifecycle services. Competitors include Dell, HPE, Intel, NetApp, Pure Storage, and rebranded ODM systems. Cloud service providers are both competitors—through technology and service-delivery innovation—and routes to market for IBM server and storage products.
• Financing: Provides client and commercial financing for IBM hardware, software, and services. It competes primarily with non-captive finance providers and financial institutions. Relevant competitive factors include rates, IT-product experience, service, contract flexibility, ease of doing business, global capabilities, and residual values. IBM identifies credit-risk and residual-value management as advantages.

The section provides no current-period financial results or quantitative financial metrics. It incorporates by reference additional material on IBM’s strategy, segments and capabilities, human capital, segment and product/service revenue, environmental activities, management discussion, and risk factors.

Risk Factors

IBM’s principal risks arise from uncertain demand and returns on investment, technology and cybersecurity threats, complex global operations, and exposure to financial, legal and regulatory developments.

Demand, innovation and execution

Economic weakness or shifts in client spending could reduce revenue and profit. Results can be difficult to predict because of technology-purchase seasonality, lengthy sales cycles, contract structures, new markets and competitors, regulatory reviews of some services contracts, and quarter-end order concentration. IBM historically reports lower revenue in Q1 than in the preceding Q4.

IBM is investing significantly in AI, hybrid cloud, quantum technologies and other strategic areas, but adoption, viable business models and financial returns are uncertain in fast-moving, competitive markets. New delivery models could also displace or reduce the profitability of existing offerings. IBM’s growth and margins could suffer if it cannot innovate, commercialize and scale products quickly, keep pace with customer preferences, or attract developer and ecosystem partners. AI introduces additional risks: systems may produce unintended results or fail to deliver expected productivity gains, create new cybersecurity vulnerabilities, or prompt litigation and regulation. IBM’s brand and competitiveness depend in part on being regarded as a technology, hybrid-cloud and AI leader.

Execution risks include failing to meet productivity and growth objectives amid automation, AI, process and workforce changes, and difficulty recruiting, retaining, training and redeploying scarce skilled employees. Reduced effectiveness of equity compensation could weaken IBM’s ability to compete for talent. Supplier concentration—including reliance by certain businesses on a limited number of server-processor suppliers—could affect availability, quality, costs and time to market. Product defects, service or delivery disruptions, internal-control deficiencies, disputes and investigations could damage IBM’s reputation and its relationships with customers, employees and partners.

Acquisitions, alliances and divestitures may not achieve expected growth, savings or strategic benefits. Integration challenges, employee retention, regulatory approvals, timing, financing needs and retained liabilities may impede transactions; capital-market disruption could make financing unavailable or more expensive and increase debt. Divestitures can leave IBM exposed to liabilities it cannot control.

Cybersecurity, data and intellectual property

Cyber threats are growing in volume and sophistication, including ransomware, social engineering, state-sponsored activity and AI-enabled attacks. Risk extends across IBM’s systems and the customer, supplier, partner and other third-party environments on which IBM depends. IBM’s systems and customer-managed environments handle sensitive data and intellectual property, including AI and quantum innovations, and support critical operations in sectors such as finance, healthcare, infrastructure and government. Complex systems, third-party infrastructure and rapid exploitation of vulnerabilities can make threats difficult to detect or contain; mitigation efforts cannot eliminate the risk.

IBM states that cybersecurity incidents or vulnerabilities have not had a material adverse effect to date. Future incidents could nevertheless cause data loss or theft, operational disruption, liability, litigation, regulatory action or debarment, customer losses, reputational and competitive harm, and substantial response and remediation costs. Expanding and uneven cybersecurity and data-protection rules—including requirements concerning critical infrastructure, connected devices, supply chains, international data transfers, data location and emerging technologies—could add compliance and reporting costs, prompt enforcement or penalties, and make some offerings harder to launch or less profitable.

IBM may not be able to protect its intellectual property or prevent competitors from developing similar offerings. Third-party patent enforcement, changes in IP law or inability to obtain needed licenses could constrain operations. Reliance on open-source and other third-party software may bring limited warranties or indemnities; loss of community maintenance could impair product support and innovation.

Global, regulatory and environmental exposure

IBM operates in more than 175 countries and derives about 60% of its revenue outside the U.S., exposing it to foreign political, legal and economic conditions, currency movements, inflation, recessions, capital controls and trade disputes. Regulation of privacy, data localization, AI, cloud services, competition, labor, anti-corruption, outbound investment and cross-border trade may raise costs or restrict operations. Tariffs, sanctions and export controls can impede delivery or increase costs. Pandemics, natural disasters, climate impacts, hostilities and terrorism could disrupt demand, operations and supply chains.

Severe weather, changing temperatures, environmental rules affecting products and data centers, carbon taxes and disclosure requirements could create costs. Environmental-law violations or liability could result in cleanup expenses, fines, sanctions or third-party claims. IBM does not expect climate change or related environmental compliance to have a disproportionate effect on its financial position, results or competitive position.

Government contracts may face funding delays, work stoppages or termination, and may involve elevated liability provisions or potential suspension or debarment. IBM also depends on resellers, distributors, software vendors and other ecosystem partners; failures or disruptions among these parties could affect its business.

Financial, legal and reporting risks

IBM’s financing business is exposed to customer concentration and credit risk, interest rates, currencies, residual values and counterparty non-performance on derivatives used to manage exposure. Market-liquidity deterioration could pressure earnings, cash flows and funding access. Most sales are made on open credit; deteriorating creditworthiness among major customers or defaults above expectations could require a higher credit-loss allowance and reduce consolidated net income.

Currency movements affect results because significant revenue and costs are denominated in local currencies. Pension-asset declines or increases in estimated liabilities amid market volatility could adversely affect results; a prolonged downturn could require additional pension funding and constrain liquidity and financial flexibility. Mandatory pension-insolvency insurance premiums outside the U.S. could also rise significantly.

Tax results and cash tax liabilities may be affected by geographic income mix, deferred-tax valuations, changes in law or accounting, and OECD global minimum-tax rules. IRS and foreign tax examinations could have adverse outcomes. IBM may also face claims, investigations, tax matters and other proceedings in the ordinary course, with uncertain outcomes. Accounting estimates, legal reserves and internal-control failures could affect reported results or financial reporting. Acquired goodwill and amortizable intangible assets may be impaired if anticipated economic benefits do not materialize.

IBM debt values are sensitive to interest rates, foreign exchange, maturities, redemption terms and other market or regulatory factors, and repayment depends on IBM’s ability to manage its business and associated risks. Common-stock prices may be volatile, while rating-agency outlook or rating changes could reduce the value and liquidity of IBM debt and equity securities. IBM does not make a market in its securities.

Cybersecurity risk management

IBM incorporates cybersecurity into its enterprise risk management framework and uses a layered control approach based on the NIST Cybersecurity Framework. Its global Security Operations Centers monitor threats using internal and external intelligence, including IBM Security X-Force Exchange. IBM also uses third-party security tools, external reviews, and certifications.

A global Computer Security Incident Response Team (CSIRT) coordinates incident response and investigations. IBM supplements these controls with workforce security-awareness programs and a supplier-risk program that assesses vendors based on the nature of their engagement, assessments, threat intelligence, and industry practices.

IBM identifies a broad and evolving threat environment, including risks associated with increased use of AI; criminal hackers, hacktivists, state-sponsored groups, nation states, and competitors; actions or omissions by employees, customers, vendors, and other third parties; technology or process errors; and its widely distributed remote workforce. IBM said cybersecurity incidents and vulnerabilities had not had a material adverse effect to date, while cautioning that future incidents could have such an effect.

Management and board oversight

A dedicated Chief Information Security Officer (CISO) leads enterprise security strategy and incident response through the Enterprise & Technology Security organization, which addresses risks to IBM’s internal systems, customer offerings, and suppliers. Specialized teams handle product vulnerabilities (PSIRT) and business-unit security (BISOs). CSIRT coordinates investigations with relevant legal, technology, business, risk, and operational functions.

Events of interest are promptly escalated to the Chief Legal Officer, CFO, and affected business-unit senior vice president. For major incidents, IBM may appoint an executive to lead the broader business response. A senior Cybersecurity Advisory Committee provides oversight and escalation for significant or emerging risks.

The Board and Audit Committee oversee cybersecurity risk, receive regular briefings from Enterprise & Technology Security and the CISO, and participate with senior management in incident-response tabletop exercises.

Item 15 — Exhibits and Financial Statement Schedules

This section is primarily an index of exhibits and incorporates IBM’s FY2025, FY2024 and FY2023 financial statements and notes by reference. The balance sheets cover December 31, 2025 and 2024. It also includes the valuation and qualifying accounts and reserves schedule; other schedules are omitted because they are not applicable, immaterial, or covered in the financial statements or notes.

Valuation and qualifying reserves

Year-end balances and opening balances, in $ millions:

IBM said additions, deductions and write-offs for these allowances and provisions were not material in any year shown. Most 2025 credit-loss write-offs related to receivables that had previously been reserved.

PwC reported that the schedule presents fairly, in all material respects, when read together with the consolidated financial statements. Its report and the Form 10-K signatures of CEO Arvind Krishna, CFO James J. Kavanaugh and Chief Accounting Officer Nicolás A. Fehring are dated February 24, 2026.

Financing and other exhibits

The exhibit list identifies revolving credit agreements amended in June 2025: a $2.5B three-year facility and a $7.5B five-year facility, or $10.0B of stated capacity combined. The exhibit list does not specify amounts drawn or available.

Debt exhibits describe notes issued in February 2025, with coupons of 2.900%–5.700% and maturities from 2030 to 2055, and notes issued February 2, 2026, with coupons of 3.000%–5.800%, including floating-rate notes due 2028, and maturities from 2028 to 2056. These are issuance terms, not debt balances or interest expense.

Other exhibits include IBM’s HashiCorp Acquisition Long-Term Performance Plan filed in 2025 and a new set of LTPP award terms effective February 15, 2026. The filing also incorporates IBM’s Executive Officer Compensation Recovery Policy, previously filed as Exhibit 97 to the 2023 Form 10-K.

Overall, Item 15 is an exhibit and incorporation-by-reference section, rather than a disclosure of new operating results or balance-sheet figures.

IBM’s 2025 Annual Report financial section comprises Management Discussion, the consolidated financial statements, and their notes. The Overview is intended to provide context for readers of that financial information. This section summary reports no financial metrics, business risks, or strategic developments.

Reporting changes and taxes

In Q1 2025, IBM changed the reported revenue categories within its Software and Consulting segments. The change did not affect consolidated financial statements or reportable segments, and all periods presented are comparable.

IBM reported income tax benefits in both FY2025 and FY2024. The FY2025 benefit primarily reflected resolution of tax audit matters; the FY2024 benefit reflected both tax audit resolutions and the tax impact of pension settlement charges.

Pension settlements and operating earnings

In FY2024, IBM transferred part of its U.S. and non-U.S. defined-benefit pension obligations and related plan assets to insurers. The transactions generated $3.1B of pension settlement charges ($2.4B after tax), reducing diluted EPS from continuing operations by $2.57 and consolidated diluted EPS by $2.56. These charges were non-operating and non-cash, and did not affect operating (non-GAAP) earnings or cash flow.

IBM presents operating earnings from continuing operations as a supplemental non-GAAP measure intended to clarify operating performance and improve comparability. It excludes specified acquisition-related charges and acquired-intangible amortization, equity-method investment basis-difference expense, and certain retirement-related costs and associated tax impacts. IBM classifies retirement costs primarily reflecting changes in pension assets and liabilities tied to financial-market performance as non-operating, distinguishing them from service and other costs included in operating earnings. The measure also treats the one-time 2017 U.S. tax-reform provisional charge and subsequent adjustments as non-operating, including adjustments related to later legislation such as H.R. 1 in July 2025. The measure supplements, and does not replace, GAAP results.

Currency and forward-looking information

IBM classified the impact of foreign-exchange derivative contracts used to hedge purchase-price exposure for the StreamSets and webMethods acquisitions as non-operating; the contracts expired by June 28, 2024. Currency-adjusted growth translates current-period local-currency activity using prior-year exchange rates and excludes the operational impacts of currency fluctuations.

Forward-looking statements are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. IBM generally undertakes no obligation to update them except as required by law.

FY2025 performance

IBM reported stronger revenue, margins and earnings in FY2025. However, the large increase in reported earnings also reflects lower retirement-related costs and tax effects, not solely improved operating performance.

Revenue increased 7.6% as reported, or 6.1% adjusted for currency. Expense and other income decreased 2.6%. The FY2024 pension-settlement charges of $3.1B contributed to the year-over-year improvement in reported expenses and earnings.

Business and geographic growth

Infrastructure growth was supported by strength in the IBM z17 sales cycle. EMEA had the strongest regional growth, while Asia Pacific declined slightly.

Operating (non-GAAP) results

Operating earnings grew 13.5%, and diluted operating EPS rose 12.2%. Operating expense and other income increased 9.6%, reflecting organic and acquired portfolio-innovation investment, currency effects and prior-year asset-sale gains; productivity savings partly offset these increases.

Cash flow and financing

Free cash flow increased $2.0B year over year. Increased cash used in financing receivables of $2.7B reflected business growth, including z17 sales. Investing cash use rose $5.4B, primarily due to the HashiCorp acquisition; financing cash use fell $3.2B, primarily driven by debt.
*Prior-period amounts are calculated from the rounded year-over-year changes stated in the filing summary.

Balance sheet and capital

Asset growth was driven mainly by goodwill and intangible assets associated largely with HashiCorp; liability growth was primarily driven by debt. Equity rose with net income and increased common stock, partly offset by dividends. IBM paid $6.3B in dividends during FY2025.

Taxes, adjustments and outlook context

The continuing-operations tax benefit was $242M versus a $218M benefit in FY2024; effective tax rates were (2.3)% and (3.8)%, respectively. Tax audit resolutions affected FY2025, while FY2024 also reflected pension-settlement tax effects. Non-GAAP reconciliation adjustments, net of tax, included acquisition-related charges of $1.534B versus $1.456B, non-operating retirement-related costs of $49M versus $2.668B, and U.S. tax reform impacts of $(1.161)B versus $(455)M.

Weighted-average diluted shares increased 1.2% to 948.7M from 937.2M. IBM said currency movements continue to affect reported revenue and profit; hedging defers but does not eliminate those effects. The company described the macroeconomic and trade environment as dynamic and emphasized its software-led hybrid-cloud and AI strategy, productivity efforts, and mission-critical infrastructure. Innovation investment, including the HashiCorp acquisition in Q1 2025, supports growth while contributing to higher operating investment and acquisition-related balance-sheet growth.

Strategy and market positioning

IBM’s strategy centers on hybrid cloud and AI, delivered through a platform-led model that combines software, consulting, mission-critical infrastructure, research and partner capabilities. More than 75% of IBM’s business mix is now in Software and Consulting, reflecting a shift toward higher-growth areas.

IBM cites research indicating that 86% of executives use hybrid-cloud architectures to deploy AI, and that a “hybrid by design” approach delivers more than three times the return on investment. IBM also reports that 80% of executives are increasing investment in agentic AI, with spending expected to nearly triple by 2027. These are market estimates attributed to IBM IBV or IBM Consulting, not IBM financial results. IBM’s thesis is that hybrid cloud and AI reinforce one another: enterprise AI must work across models, data and applications in hybrid environments, while AI can help manage those environments through visibility, optimization and automation.

Portfolio and business model

• Software includes Hybrid Cloud (including Red Hat), Automation (including Apptio and HashiCorp), Data (including watsonx) and Transaction Processing. The portfolio supports hybrid deployments, embeds security and AI, and helps generate demand for consulting and IBM infrastructure.
• Consulting provides strategy, technology implementation, managed services and intelligent operations. Its delivery increasingly uses IBM Consulting Advantage, an AI platform.
• Infrastructure includes IBM Z, Power, Storage, IBM Cloud IaaS and infrastructure support. IBM cites IBM IBV research that mainframes handle 70% of the world’s transactional workflows, underscoring IBM Z’s role in high-volume, mission-critical workloads.
• Financing supports client purchases, primarily of IBM products and services. Commercial-financing receivables are sold to a third-party investor on a revolving basis.

IBM operates in more than 175 countries and uses ecosystem partnerships to extend distribution and support client choice. Its relationships include Adobe, AWS, Microsoft, Oracle, Palo Alto Networks, Salesforce, SAP and ServiceNow; AI partnerships include NVIDIA, Anthropic, Groq and AMD.

Strategic developments

In 2025, IBM embedded agentic capabilities into products, evolved its Granite family into specialized open models focused on performance and cost, and enhanced Red Hat’s AI platform with inference capabilities for hybrid deployments. Semiconductor research and the Spyre AI accelerator support AI capabilities in z17 and Power11 systems. IBM also reported progress toward quantum advantage in 2026 and fault tolerance by 2029; these are future milestones, not achieved outcomes. Its Mathematics of Computation initiative advances work on AI, quantum computing and their convergence.

IBM closed the acquisitions of HashiCorp, expanding hybrid-cloud infrastructure automation, and DataStax, strengthening AI capabilities for unstructured data. It also announced its intention to acquire Confluent to address real-time, high-volume, distributed event-streaming needs; that transaction was announced, not described as completed. These developments reflect reliance on both internal research and development and acquisitions.

Workforce

At December 31, 2025, IBM reported 264.3 thousand employees at IBM and wholly owned subsidiaries, and 8.7 thousand at less-than-wholly owned subsidiaries. It also estimated a complementary workforce of 13.8 thousand full-time equivalents hired through temporary, part-time and limited-term arrangements. IBM highlighted hiring and reskilling in consulting, technical and AI skills. More than 200,000 employees participated in its 2025 engagement survey; more than eight in ten respondents reported feeling engaged, and nearly nine in ten felt empowered to be themselves. Attracting and retaining talent and transforming workforce skills remain execution priorities in a competitive labor environment.

FY2025 performance

IBM revenue increased 7.6% to $67.535B; growth was 6.1% adjusted for currency. Gross profit grew faster than revenue, and gross margin expanded 1.5 percentage points. Excluding acquired-intangible amortization, operating gross profit and margin also improved.

Amortization of acquired intangible assets rose 22.6% year over year.

Reportable segments

Software was the largest segment and grew broadly, with double-digit growth in three of its four reported product lines. Its gross margin declined 0.2 percentage points. Consulting revenue grew modestly, while its gross margin improved. Infrastructure delivered the strongest segment revenue growth among the larger businesses and expanded gross margin. Other includes reductions for estimated residual value less related unearned income on sales-type leases, reflecting the June 2025 z17 launch.

Software revenue by product line

Management attributed Hybrid Cloud growth to demand for hybrid-cloud solutions. OpenShift annual recurring revenue reached $1.9B at FY2025 year-end, growing more than 30% year over year. Automation growth reflected HashiCorp acquisition contributions and demand for infrastructure and workflow automation, resilience, and cost efficiency. Data growth was driven by demand for generative-AI products and strategic-partner performance supporting AI innovation and mission-critical workloads. Transaction Processing growth reflected the June 2025 IBM z17 launch and the strategic importance of mission-critical software.

In Q1 2025, IBM revised reported revenue categories within Software and Consulting and presented the revised categories comparably for all years. The change did not affect consolidated financial statements or reportable segments. Software no longer reports Hybrid Platform & Solutions or Security categories; Consulting now reports Strategy and Technology and Intelligent Operations.

FY2025 performance

Unless otherwise stated, figures are for FY2025 versus FY2024. IBM’s revenue increased 7.6% as reported (6.1% currency-adjusted). Infrastructure and EMEA were notable sources of growth; Consulting returned to growth in the second half. Segment profitability improved across Software, Consulting and Infrastructure, supported by revenue growth and productivity actions, with investment in innovation and acquired businesses an offset.

Revenue by business

Consulting revenue grew 1.8% reported, or 0.4% currency-adjusted. Strategy and Technology grew 0.4% reported but declined 1.0% currency-adjusted; Intelligent Operations grew 3.4% reported and 2.2% currency-adjusted. Demand included application transformation, migration and modernization, operations, cybersecurity, and AI-enabled transformation.

Infrastructure revenue grew 12.1% reported and 10.4% currency-adjusted. Hybrid Infrastructure increased 19.1% reported (16.9% currency-adjusted), driven in part by IBM Z revenue growth of 51.7% (48.4% currency-adjusted). IBM attributed demand to the z17 launch in June 2025 and its real-time AI inferencing, quantum-safe security and operational efficiency capabilities; it said this product cycle outpaced prior cycles. Distributed Infrastructure declined 1.8%, an improvement from its 3.4% decline in 2024, with Power improving in the second half after the Power11 launch. Infrastructure Support declined 0.1% reported and 1.0% currency-adjusted.

Segment profitability

Software gross profit grew 10.4%; gross margin was 83.5%, down 0.2 percentage points. Segment profit grew 14.2%, with margin up 1.0 point to 33.1%. IBM attributed the improvement to revenue growth and productivity actions, partly offset by portfolio innovation investment.

Consulting gross profit grew 5.9%, and margin expanded 1.1 points to 28.1%. Segment profit rose 20.0%, with margin up 1.8 points to 11.7%, reflecting productivity actions partly offset by acquisition and innovation investment. Infrastructure gross profit grew 17.9%, and margin expanded 2.9 points to 58.6%. Segment profit increased 41.2%, with margin up 4.5 points to 22.0%; productivity and favorable revenue growth and mix contributed, partly offset by product innovation investment.

Geographic revenue

Americas revenue grew 6.6%; EMEA grew 14.2% reported (9.0% currency-adjusted), with strength in France, the UK and Italy. Germany grew 3.8% reported but declined 1.3% currency-adjusted. Asia Pacific declined 0.4% reported and 0.7% currency-adjusted.

Operating metrics and demand indicators

Software ARR increased approximately $2B. IBM updated its ARR calculation in Q1 2025 to include all recurring Software-segment revenue and used the same basis for the 2024 comparison; ARR annualizes current-quarter recurring revenue and is not a forecast of revenue to be recognized.

Consulting signings declined 13.3% (14.7% currency-adjusted) against strong 2024 signings. Trailing-12-month book-to-bill was 1.03. Signings and backlog are management estimates and may not convert to revenue as expected; conversion depends on contract mix and duration, customer decisions, macroeconomic conditions and other factors.

Expenses, other income and financing costs

Total expense and other income declined 2.6%, primarily because FY2024 included $3.1B of pension settlement charges and FY2025 benefited from productivity savings. These effects were partly offset by lower divestiture and asset-sale gains, currency and investment. FY2024 total expense included $611M of pre-tax gains, primarily from The Weather Company asset divestiture and QRadar SaaS asset sales.

In contrast, operating (non-GAAP) expense and other income rose 9.6%; its ratio to revenue increased 0.7 points to 40.7%, reflecting investment in portfolio innovation and acquired businesses despite productivity savings. R&D growth reflected investment in AI, hybrid cloud, quantum and acquired businesses. Stock-based compensation included $85M of acquisition-related awards. The credit-loss provision primarily reflected higher unallocated reserves amid current economic conditions.

Other income and expense shifted to $442M of income from $1.871B of expense, chiefly reflecting the prior-year pension settlement charge, partly offset by $295M higher net exchange losses and the prior-year divestiture and asset-sale gains. Foreign-currency transactions recorded $993M of losses versus $458M of gains in FY2024. Interest expense increased 13.1%, driven by higher average rates and debt balances; interest included in cost of financing was $2.301B, up $253M.

Stock-based compensation

FY2025 pre-tax stock-based compensation expense increased $404M from FY2024, reflecting annual employee and executive awards and awards issued or assumed in the HashiCorp acquisition. Higher restricted stock unit and performance share unit expense accounted for $289M and $75M of the increase, respectively.

Retirement-related costs

Total FY2025 pre-tax retirement-related cost fell substantially, principally because FY2024 included $3.1B of pension settlement charges. Operating retirement costs were down $17M; non-operating costs declined largely with the lower settlement charges.

The net underfunded position of retirement and postretirement plans improved by $374M to $2.283B at year-end 2025, primarily due to higher discount rates. Worldwide qualified defined-benefit plans were 116% funded; the U.S. Personal Pension Plan was 137% funded and returned 8.8% in 2025. Global plan-asset returns were 5.4%. Expected 2026 required contributions for qualified defined-benefit and multi-employer plans are $100M.

Income taxes

The continuing-operations rate primarily reflected resolution of tax audit matters in FY2025 and the tax effects of pension settlements and audit resolutions in FY2024. The operating non-GAAP rate was nearly unchanged.

Cash, debt and capital allocation

Operating cash flow decreased $252M. Increased cash use in financing receivables ($2.728B year over year), including growth associated with the z17 sales cycle, was partly offset by performance-related improvements within net income. Free cash flow increased $1.986B. Acquisition spending was primarily for HashiCorp, completed in Q1.

Debt increased $6.287B, primarily from first-quarter issuance to increase liquidity and plan for maturities.

Working capital and liquidity

Working capital deteriorated by $3.054B. Current assets rose mainly because of receivables, while higher deferred income, short-term debt (including reclassifications from long-term debt net of maturities) and accounts payable contributed to the $5.516B increase in current liabilities.

Credit losses and balance sheet

IBM’s allowance for credit losses on receivables increased to $276M at year-end 2025. Excluding receivables held for sale, total provision coverage declined to 1.1% from 1.4%, primarily because receivables grew alongside revenue growth. Most write-offs related to receivables that had previously been reserved.

Noncurrent assets grew by $9.824B after adjusting for currency, primarily reflecting goodwill and intangible assets—mainly from the HashiCorp acquisition—higher long-term financing receivables, and higher deferred taxes. Long-term debt increased by $3.063B after currency adjustment, mainly due to first-quarter 2025 issuances, partly offset by reclassification of upcoming maturities to short-term debt and currency impacts.

Total debt increased by $4.375B after currency adjustment. IBM issued $8.391B of debt to increase liquidity and plan for future maturities, partly offset by $5.489B of maturities. Non-Financing debt rose by $1.612B after currency adjustment, primarily reflecting issuances and maturities; Financing segment debt rose by $2.763B after adjustment, mainly to support increased financing receivables. Financing debt primarily funds IBM’s external client assets, largely through intercompany loans structured to substantially match the term, currency, and interest-rate variability of financing receivables. The Financing segment’s debt-to-equity ratio remained 9.0:1 at year-end 2025.

Noncurrent liabilities excluding debt declined by $2.514B after currency adjustment, primarily due to lower income tax reserves and retirement and postretirement obligations, partly offset by higher deferred income. Total equity increased by $5.348B during 2025, principally reflecting $10.593B of net income and a $1.937B increase in common stock, partly offset by $6.255B of dividends paid.

Cash flow and financial flexibility

Operating cash flow decreased $252M, or 1.9%, year over year. Higher cash used in financing receivables—up $2.728B—reflected business growth and strength in the z17 sales cycle; performance-related improvements in net income partly offset the increase. Operating cash flow included non-cash adjustments related to income tax benefits from the resolution of tax audit matters in both years. FY2024 also included the tax benefit associated with pension settlement charges.

Investing cash outflow increased $5.365B, primarily because of the HashiCorp acquisition, lower divestiture proceeds, and higher net capital expenditures. FY2024 divestiture proceeds included the sale of The Weather Company assets and benefited from proceeds from certain QRadar SaaS assets. These increases were partly offset by lower net purchases of marketable securities and other investments.

Financing cash outflow decreased $3.250B, mainly reflecting higher proceeds from new debt issuances and lower cash used for debt maturities.

Continuing-operations results

IBM’s operating gross profit increased alongside margin expansion. Operating income from continuing operations rose approximately 13.5%. GAAP pre-tax income and continuing-operations income were also substantially higher than in 2024.

Reconciliation and comparability

Operating results included net pre-tax acquisition-related adjustments of $2.320B in 2025 and $1.953B in 2024. Retirement-related adjustments were $65M in 2025, compared with $3.457B in 2024; the 2024 amount principally reflected pension settlement charges of $3.1B pre-tax ($2.4B after tax). Those charges materially affected GAAP comparability between the years. The reconciliation also included a U.S. tax reform impact of $1.161B in 2025 and $455M in 2024.

Tax benefits in both years primarily reflected the resolution of certain tax audit matters. IBM cautions that its operating earnings measure may not be comparable to similarly titled measures used by other companies.

FY2024 revenue-category performance

IBM’s revenue-category figures below are recast for category changes made in January 2025; the changes did not affect consolidated financial statements or reportable segments.

Software growth reflected strength in both recurring and transactional software. Hybrid Cloud growth was led by double-digit growth in Red Hat OpenShift and Ansible, with solid RHEL growth; OpenShift annual recurring revenue (ARR) was $1.4B at FY2024 year-end. Automation benefited from SaaS subscriptions, including AIOps and Management, while Data grew on strength across IBM’s AI portfolio. Transaction Processing was supported by clients’ capacity needs, solid renewals, and increased contributions from generative-AI products, including watsonx Code Assistant for Z.

Software ARR was $21.3B at FY2024 year-end, approximately $1B above FY2023 year-end. IBM updated its ARR calculation to include all recurring revenue within Software and recast both years.

Consulting’s reported revenue declined, but increased slightly on a currency-adjusted basis. Growth in Strategy and Technology—led by business and digital transformation work, including AI- and analytics-focused projects and finance and supply-chain transformations—was offset by declines in Intelligent Operations. In Intelligent Operations, lower custom application management revenue was partly offset by growth in platform engineering and cloud application management, as clients prioritized cloud modernization and cloud-based application development.

Strategy and outlook

IBM said 2025 revenue, profit, and cash generation exceeded expectations, supported by momentum in hybrid cloud and AI. It entered 2026 confident in its ability to deliver long-term growth, while identifying a dynamic operating environment. IBM points to its broad portfolio, disciplined innovation investment, productivity focus, and strong liquidity as supports for performance durability.

IBM sees hybrid cloud and AI as core enterprise platforms and is positioning its offerings to help clients move AI from pilots into secure, governed production—emphasizing productivity, automation, and bringing AI to data. In 2025, it launched watsonx.data integration and watsonx.data intelligence for insights from unstructured data, the IBM z17 with enhanced multi-model AI acceleration, and Power11 for mission-critical, data-intensive workloads. IBM Consulting is using its AI delivery platform, IBM Consulting Advantage, to scale client implementations and embed AI in project work. IBM also continues to invest in Quantum.

IBM completed ten acquisitions in 2025. HashiCorp, acquired in Q1, adds automation and security capabilities complementary to hybrid cloud.

Planned Confluent acquisition

On December 8, 2025, IBM announced a planned acquisition of Confluent for $31 per share in cash, representing approximately $11 billion in total enterprise value. Confluent shareholders approved the merger on February 12, 2026; closing is expected by mid-2026, subject to regulatory approval and customary conditions. IBM plans to integrate Confluent into Software, combining its data-flow and communications capabilities with IBM’s portfolio to support generative and agentic AI. Completion and integration remain subject to regulatory and execution risks.

Operations and retirement plans

IBM is applying AI and operational efficiencies internally through its “Client Zero” approach. Beginning in Q2 2025, it shifted Distributed Infrastructure manufacturing to an industry-standard strategic partner as part of a supply-chain transformation intended to simplify and improve efficiency. The section does not quantify the resulting savings or operational effects.

At year-end 2025, worldwide qualified plans were 116% funded and U.S. qualified plans were 137% funded. The expected increase in non-operating plan cost primarily reflects higher recognized actuarial losses, interest cost, and amortization of prior-service costs. Estimates use pension assumptions as of December 31, 2025.

Liquidity and cash flows

IBM said its liquidity and cash flows provide financial flexibility to operate at a single-A credit rating.

Debt and credit profile

Debt increased by $6.3B during FY2025. IBM issued $8.4B of debt and had $5.5B of maturities. In Q1 2026, it issued a further $7.4B of debt for general corporate purposes.

Credit ratings were unchanged from December 31, 2024, to December 31, 2025:

IBM was in compliance with its debt covenants at year-end. Key restrictions include limits on secured indebtedness and sale-leaseback transactions, capped at 10% of consolidated net tangible assets; a minimum consolidated net interest expense ratio of 2.20:1.0; and cross-default provisions for other defaulted indebtedness of at least $500M. Breaches could accelerate repayment of affected debt.

Debt documents do not permit acceleration solely because of a credit-rating change. Derivative contracts do contain standard clauses that may permit termination if IBM falls below investment grade. Derivatives in a liability position had a fair value of $513M at December 31, 2025, before applicable netting; that amount can fluctuate with market conditions and outstanding instruments.

Cash flow, investment and financing

IBM uses free cash flow (FCF) to assess operating performance, capacity for strategic investment and shareholder returns, and ability to incur and service debt. It cautions that FCF is not entirely available for discretionary spending. IBM defines FCF as operating cash flow adjusted for changes in Financing receivables and net capital expenditures, including software investment and other asset sales. Because management views Financing receivables as profit-generating investments that support Financing returns on equity—not working capital to minimize—it presents operating cash flow both including and excluding their effect.

FCF rose 15.7% in FY2025, following a 13.4% increase in FY2024.

IBM — FY2025 Management Discussion

Cash generation and shareholder returns

¹ Prior-year free cash flow inferred from the stated $2.0B year-over-year increase.

Higher net income primarily drove the improvement in free cash flow, partly offset by higher net capital expenditures. The comparison was also affected by cash proceeds in the prior year from selling certain QRadar SaaS assets. Acquisitions included HashiCorp. In Q2 2025, IBM raised its quarterly common dividend from $1.67 to $1.68 per share.

Liquidity, retirement plans and contractual obligations

IBM says operating cash flows are sufficient to fund current operations and obligations, including investment, dividends and debt service. It also identifies additional borrowing at reasonable rates and committed global credit facilities as liquidity sources.

Legally required contributions to certain non-U.S. pension plans are expected to total approximately $0.8B over the next five years, including approximately $0.1B in 2026. Contributions to all retirement-related plans are expected to be approximately $1.4B in 2026, about $0.1B above 2025; no U.S. defined-benefit pension contribution is legally required in 2026. Market performance and more frequent funded-status remeasurement in some countries could increase mandated contributions, and future amounts cannot be reliably estimated.

Contractual obligations as of December 31, 2025:

Contractual-obligation figures may differ from balance-sheet amounts because some exclude time value or uncertain future cash outflows.

Risks and off-balance-sheet exposure

Cash flows could be affected by material changes in operating results or geographic cash sources, adverse litigation, severe capital-market downturns that increase pension requirements, or the timing of tax payments. IBM reported no off-balance-sheet arrangements at December 31, 2025 that had, or were reasonably likely to have, a material effect on its financial condition, results, liquidity or capital resources, and no retained interests in transferred assets or other material off-balance-sheet interests. Ordinary-course client financing commitments, guarantees and indemnifications are addressed separately.

Critical accounting estimates and risks

Pension assumptions

At December 31, 2025, the discount rate for the U.S. Qualified PPP and Excess Personal Pension Plan declined 30 basis points to 5.2%. IBM estimates this change will reduce 2026 pre-tax income by $40 million. Relative to the stated assumptions, a 25-basis-point increase in the discount rate would raise 2026 pre-tax income by an estimated $30 million; a 25-basis-point decrease would lower it by an estimated $70 million. These sensitivities include a corresponding change in the interest crediting rate, and discount-rate changes also affect the expected-return assumption.

A 25-basis-point increase or decrease in the discount rate would decrease or increase the projected benefit obligation (PBO), respectively, by approximately $300 million. Based on 2026 assumptions, each 50-basis-point change in the expected long-term return assumption would affect the following year’s pre-tax net periodic pension income or cost by approximately $90 million. A higher PBO relative to plan assets could influence future funding decisions, and actual experience could lead IBM to fund more or less than planned. Since 2024, following changes to the Qualified PPP, the plan’s interest crediting rate and expected return on plan assets have been based on their relationship to the plan discount rate.

Revenue and service-contract estimates

Complex contracts with nonstandard terms require judgment in identifying performance obligations and standalone selling prices, determining whether IBM or a reseller is the principal, deciding whether contracts should be combined, assessing collectibility, and estimating variable consideration—including rebates, discounts, service penalties, and performance bonuses. IBM reassesses these estimates quarterly, so changes in judgments may affect the timing or amount of recognized revenue.

For cost-to-cost service contracts, IBM estimates future labor and product costs and productivity. If a contract is expected to be unprofitable, the estimated loss for the remainder of the contract is recognized immediately in cost. Contract-loss provisions were not material at December 31, 2025 or 2024.

Income taxes

Tax expense is subject to uncertainty from tax positions and audit settlements, changes in tax law, deferred-tax-asset valuation allowances, and the geographic mix of income. A 1% change in the tax provision as a percentage of 2025 income from continuing operations before income taxes would change consolidated net income by approximately $100 million in the opposite direction. Reassessments of uncertain tax liabilities or deferred-tax-asset realizability affect tax expense in the period of the reassessment.

Goodwill, legal contingencies, and financing credit risk

IBM assesses goodwill annually and when impairment indicators arise. Its process uses qualitative screening and, if needed, quantitative fair-value testing based primarily on discounted cash flows. For the 2025 annual review, IBM used a qualitative assessment and determined that quantitative impairment testing was not necessary. Valuations remain sensitive to reporting-unit revenue growth and margins, discount and terminal-growth rates, capital spending, taxes, and economic conditions.

IBM reviews significant claims and proceedings at least quarterly and accrues losses when they are probable and reasonably estimable. Uncertainty about the likelihood and amount of losses means revised estimates could materially affect results or financial position.

IBM’s Financing business reviews receivables and updates credit-loss allowances at least quarterly. Actual credit losses may differ materially from reserves, particularly if economic conditions deteriorate or a client representing a significant portfolio concentration experiences a sudden decline in financial health.

Currency-rate fluctuations

Continuing-operations revenue grew 7.6% in 2025 as reported and 6.1% at constant currency versus 2024. The constant-currency calculation excludes management’s operational actions to mitigate exchange-rate movements.

Currency movements and incomplete hedging affected revenue, profit, and cash flows. Translation and hedging contributed approximately $200M to year-over-year pre-tax income growth, including approximately $100M to growth in operating (non-GAAP) pre-tax income. Their effect on year-over-year segment profit-margin growth was not material.

At December 31, 2025, exchange-rate changes meant that assets and liabilities denominated in most local currencies translated into more U.S. dollars than at year-end 2024. IBM’s hedging program limits specific transaction exposures but defers rather than eliminates currency volatility; future effects remain difficult to predict because they depend on exchange rates, operating responses, and hedge timing. For non-U.S. subsidiaries and branches that operate in U.S. dollars or in highly inflationary economies, translation adjustments are reflected in earnings. IBM generally manages their currency risk by linking prices and contracts to U.S. dollars.

IBM market risk and Financing segment

Market-risk sensitivities

The greater interest-rate sensitivity primarily reflected changes in debt maturities, interest-rate profile and amount. IBM uses swaps, forwards and options to manage interest-rate and currency exposures, and said it does not anticipate material losses from these risks. The sensitivity model holds other variables constant and excludes certain exposures, including lease receivables, forecast foreign-currency cash flows and net investments in foreign operations. As a result, changes in instrument values may not be matched by changes in the items being financed or hedged.

Financing segment results

Revenue grew 3.3% (2.5% adjusted for currency), primarily from growth in client financing assets. Segment profit growth reflected higher revenue and increased intercompany financing net other income from sales of returned leased equipment to Infrastructure, associated with IBM Z product-cycle dynamics. This intercompany activity is eliminated from IBM’s consolidated results. Higher net income drove the increase in return on equity.

Financing receivables and segment balance-sheet measures

Allowance coverage declined amid receivables growth and write-offs of previously reserved balances. Approximately 78% of the external portfolio was with investment-grade clients, up 4 percentage points year over year. IBM cited rigorous credit policies and mitigating actions.

Internal Control Over Financial Reporting

IBM management concluded that the company’s internal control over financial reporting was effective as of December 31, 2025, using the COSO 2013 Internal Control—Integrated Framework. PricewaterhouseCoopers LLP, IBM’s independent registered public accounting firm, audited the consolidated financial statements and internal control over financial reporting.

Management cautions that internal controls provide reasonable, not absolute, assurance: they may not prevent or detect every misstatement, and their effectiveness can change as conditions or compliance change. This section reports no specific control deficiencies or financial and operating metrics.

Independent auditor’s report

PwC issued unqualified opinions on IBM’s consolidated financial statements for the years ended December 31, 2025, 2024, and 2023. It also concluded that IBM maintained effective internal control over financial reporting as of December 31, 2025. The report identified no material weakness or audit qualification.

Critical audit matter: uncertain income tax positions

PwC identified IBM’s uncertain income tax positions across the U.S. and numerous foreign jurisdictions as a critical audit matter. IBM reported $6.7 billion of unrecognized tax benefits as of December 31, 2025. Estimating these amounts requires management judgment about complex tax laws, potential audit outcomes, and which tax positions are likely to be sustained; reviews or settlements with tax authorities could lead to significant adjustments.

PwC tested relevant controls, calculations, and supporting information; assessed management’s judgments and the completeness of identified tax positions; and examined the status and results of pending tax audits, with assistance from tax specialists. This critical audit matter did not qualify PwC’s overall audit opinion.

PwC and its predecessor firms have served as IBM’s auditor since 1923.

IBM FY2025 financial statements

Consolidated results

Revenue growth accelerated to 7.6% in FY2025 from 1.4% in FY2024. Gross profit increased 10.5%, and gross margin expanded to approximately 58.2% from 56.7%.

SG&A rose to $20.123B from $19.688B, and R&D increased to $8.316B from $7.479B. Other (income) and expense shifted from $1.871B of expense to $442M of income, materially contributing to the improvement in pretax income. Interest expense increased to $1.935B from $1.712B.

Cash flow and uses

Operating cash flow was below FY2024 and FY2023’s $13.931B, including a $4.278B cash use from receivables, including financing receivables, compared with a $374M use in FY2024. Cash flow after property and equipment capex was approximately $12.102B, versus $12.397B. IBM also received $8.391B of debt proceeds and repaid $5.489B of debt. Stock-based compensation increased to $1.715B from $1.311B.

Balance sheet and equity

Debt net of cash was approximately $47.673B. IBM stockholders’ equity less goodwill and intangible assets—tangible common equity—was approximately negative $46.460B; total assets less goodwill and intangible assets were $72.772B. Interest paid on debt was $2.042B, compared with $1.978B.

Shares outstanding, calculated as issued shares less treasury shares, were 926.290M at the start of FY2025 and 936.952M at year-end. Common dividends per share were $6.71, versus $6.67 in FY2024. Equity increased despite dividends paid, supported by net income; total comprehensive income was $10.148B.

Other comprehensive loss, net of tax, was $445M in FY2025, versus income of $3.492B in FY2024. FY2025 included $972M of foreign-currency translation losses. Retirement-related benefit-plan gains before tax were $548M in FY2025, compared with $4.142B in FY2024.

Overall, stronger revenue growth and earnings accompanied larger acquisition cash outlays, rising goodwill and debt, increased stock-based compensation, and a substantial cash use from receivables.

IBM FY2025 financial statements and notes

Consolidated results

Revenue grew 7.6% in FY2025, compared with 1.4% growth in FY2024. The FY2025 continuing-operations effective tax rate was (2.3)%, primarily reflecting tax-audit resolutions; FY2024 also benefited from audit resolutions and pension-related tax effects. FY2025 included an approximately $300M income-tax charge from a tax-law change, primarily enactment of H.R. 1, while a $2.754B benefit from changes in unrecognized tax benefits materially affected the tax result.

Segments and business lines

Software revenue growth accelerated to 10.6% from 8.3%; Consulting returned to growth, up 1.8% after a 0.9% decline; Infrastructure grew 12.1% after declining 3.9%. Financing profit increased 49.6%, and its segment margin rose to 70.7% from 48.8%. Segment profit is IBM’s management-reporting measure, not consolidated pretax income.

The z17 launch contributed to the Infrastructure rebound; FY2025 other revenue also included a reduction for estimated residual value, net of unearned income, on related sales-type leases. IBM recast Software and Consulting revenue categories in 2025 for comparability, without changing consolidated results or reportable segments.

Segment-profit reconciliation to pretax income

The sharp decline in retirement-related costs drove much of the pretax improvement: FY2024 included $3.1B of pension settlement charges ($2.4B after tax), following transfers of approximately $6B of Qualified PPP obligations and assets and approximately $1.2B of Canadian plan obligations and assets.

Acquisitions, contracted revenue and receivables

IBM completed ten FY2025 acquisitions for $9.346B, including HashiCorp for $7.433B total consideration ($7.390B cash). HashiCorp added $4.684B of goodwill, expected to be nondeductible for tax, and supports IBM’s hybrid-cloud and AI strategy. In December 2025 IBM announced a proposed Confluent acquisition for approximately $11B enterprise value; it was approved by Confluent stockholders in February 2026, with closing expected by mid-2026 subject to customary conditions and regulatory approval.

Remaining performance obligations were approximately $71B at year-end; about 67% is expected to be recognized within two years and 30% in years three to five. IBM sold trade receivables without recourse for $3.8B in FY2025, versus $4.2B in FY2024 and $3.4B in FY2023; $0.3B of sold receivables remained uncollected at year-end, compared with $0.9B a year earlier.

Financial position, debt and risk

Goodwill additions were $5.912B, primarily from HashiCorp; acquired intangibles added $2.491B, and amortization expense was $2.737B. IBM recorded no goodwill or intangible-asset impairment in FY2025 or FY2024. Financing receivables grew 29.3%; client loans were $8.856B, sales-type/direct-financing leases $4.336B, commercial financing held for investment $1.861B, and held-for-sale financing $1.131B. The total credit-loss allowance was $141M, versus $128M.

IBM issued $3.6B of euro notes and $4.75B of U.S.-dollar notes in FY2025. Debt fair value was $52.703B versus its $54.836B carrying value. Interest expense rose to $1.935B from $1.712B. IBM was compliant with its minimum consolidated net-interest-expense covenant ratio of 2.20:1 and had $10B of undrawn revolving credit agreements.

Retirement, compensation and accounting judgments

Net periodic retirement-benefit cost was $1.068B in FY2025, versus $4.478B in FY2024 and $1.149B in FY2023. Defined-benefit pension cost was $477M, versus $3.918B in FY2024, which included settlement charges. At year-end 2025, defined-benefit plans were $7.544B overfunded for overfunded plans and $9.828B underfunded for underfunded plans; the U.S. Qualified PPP was 137% funded. Pension valuations remain sensitive to discount rates, investment returns, compensation and mortality assumptions.

Pre-tax stock-based compensation expense was $1.715B in FY2025, up from $1.311B. Unrecognized compensation cost was $2.3B, expected to be recognized over about 2.5 years. At year-end, outstanding awards included 16.876M RSUs and 2.910M PSUs; 936,952,129 common shares were outstanding. IBM’s share repurchase program has been suspended since 2019.

IBM’s estimates for contract costs, credit losses, goodwill and intangible valuations, pensions, taxes and contingencies require judgment. Cost-to-cost services contracts are exposed to labor, product-cost and productivity revisions; expected contract losses are recognized immediately. Deferred contract and software costs are subject to recoverability tests, and tax benefits depend on jurisdiction-specific forecasts and resolution of uncertain tax positions. Unrecognized tax benefits were $6.655B at year-end, with $5.946B potentially favorable to the effective tax rate if recognized; IBM disputes IRS cross-border tax adjustments.**

Pension plan investment strategy and funding

In 2025, IBM changed the U.S. Qualified Personal Pension Plan (PPP) investment strategy to increase return-seeking assets and reduce debt securities, with the aim of improving expected returns. Its target allocation is 55% fixed income, 15% equities and 30% other return-seeking assets, including hedge funds, infrastructure equity and other debt securities. The strategy balances return potential against the risk that inflation, equity volatility or interest-rate movements could leave plans underfunded and increase IBM’s contribution needs.

At December 31, 2025, the fair value of IBM’s defined benefit (DB) plan assets was $44.806B, up from $42.796B a year earlier. Investments measured using the NAV practical expedient totaled $18.589B, compared with $16.659B in 2024.

The non-U.S. plans’ weighted-average target allocation was 57% fixed income, 18% equities, 17% insurance contracts and 9% other investments (percentages as reported). Local solvency requirements and governance arrangements lead to differences among individual plans. IBM uses derivatives for fixed-income, duration, interest-rate, credit and currency management, as well as cash equitization and alternative strategies.

The U.S. Qualified PPP held $1.753B of less-liquid private-market assets—including private equity, credit, real estate and infrastructure equity—and had another $1.720B of private-market investment commitments expected to be funded over multiple years from plan assets. These investments carry illiquidity and valuation uncertainty: NAV investments rely on underlying-fund valuations, and real estate valuations require judgment and periodic appraisals.

Nonpension postretirement plans with accumulated postretirement benefit obligations (APBO) above assets are underfunded or unfunded. IBM expects DB pension benefit payments of $3.713B in 2026 and $16.664B over 2031–2035; expected nonpension postretirement payments are $312M in 2026 and $1.291B over 2031–2035. Payments for underfunded plans that are not covered by plan assets are included in current liabilities.

Contributions and benefit payments

IBM’s contributions and direct benefit payments totaled $1.317B in 2025, compared with $1.291B in 2024.

IBM has no legal requirement to contribute to U.S. DB plans in 2026, though it may make discretionary contributions. It estimates approximately $100M of contributions to non-U.S. DB and multi-employer plans, mostly mandated contributions in Japan and Spain. Market performance could increase required contributions in countries where funded status is remeasured frequently.

Stockholder Information

IBM common stock trades on the New York Stock Exchange and NYSE Texas under the ticker IBM. The 2026 Annual Meeting is scheduled for April 28, 2026. IBM’s investor website provides access to SEC filings and related materials. The Computershare Investment Plan offers dividend reinvestment, direct stock purchases, and safekeeping of stock certificates.