Software revenue increased to $6.336 billion, up from $5.899 billion in the prior year, indicating strong performance in this key segment. This growth is attributed to increased demand for hybrid cloud and AI capabilities.

Consulting revenue decreased by 2.3% YoY to $5.068 billion. However, Intelligent Operations showed sequential improvement compared to the fourth quarter of 2024, indicating a potential turnaround in this area.

The company completed the acquisition of HashiCorp, investing $7.1 billion in acquisitions during the quarter. Management highlights that the acquisition will enhance IBM's AI and hybrid cloud offerings, aligning with their strategic focus.

Gross margin increased 1.7 points YoY to 55.2%, driven by ongoing productivity initiatives and operating leverage. This demonstrates management's ability to improve efficiency and profitability.

Total expense and other income increased to $6.873 billion, driven by strategic investments and the prior year gain on the divestiture of The Weather Company assets. This indicates a balance between cost control and strategic investments.

Consulting signings decreased 10.5% YoY, suggesting potential challenges in securing new projects and maintaining growth in this segment. Management attributes this to macroeconomic uncertainty and elongated decision-making processes.

Management acknowledges that the uncertain macroeconomic environment is impacting client spending, particularly on discretionary projects, and elongating the decision-making process on larger projects. This poses a risk to future revenue growth.

Movements in global currencies impacted reported revenue and profit, requiring management to adjust for currency effects to provide a clearer view of underlying performance. This ongoing volatility presents a risk to financial results.

The company is involved in various tax examinations and legal proceedings, including challenges with Brazilian tax authorities and ongoing disputes with the IRS. These matters create uncertainty and could result in material liabilities.

Software revenue growth of 7.4% (9.0% adjusted for currency) is attributed to demand for IBM's focused portfolio that provides end-to-end hybrid cloud and AI capabilities. This demonstrates IBM's competitive strength in these key areas.

The upcoming launch of the IBM z17 is highlighted as offering enhanced AI acceleration, new security features, and tools that leverage AI for improving system usability. This demonstrates IBM's commitment to innovation and maintaining a competitive edge.

The decrease in Consulting signings suggests increased competition and client hesitancy in committing to new projects. This highlights the need for IBM to differentiate its consulting services and adapt to changing client needs.

Gross margin increased 1.7 points YoY to 55.2%, driven by ongoing productivity initiatives and operating leverage. This indicates successful efforts to improve efficiency and reduce costs.

Operating (non-GAAP) SG&A expense decreased, driven by lower spending reflecting the benefits from productivity actions focused on transforming enterprise operations. This further demonstrates management's focus on efficiency.

Management proactively took actions to bolster the supply chain ahead of the z17 launch, resulting in higher inventory levels. This demonstrates proactive supply chain management to mitigate potential disruptions.

Research and development (R&D) expense increased 8.6% YoY, driven by investments to drive innovation in AI, hybrid cloud, and quantum. This reflects IBM's commitment to technological advancement.

The upcoming launch of the IBM z17 is highlighted as offering enhanced AI acceleration through multi-model AI capabilities, new security features, and tools that leverage AI for improving system usability. This demonstrates IBM's focus on incorporating AI into its core offerings.

Organic Software revenue contributed approximately 4 points of growth, with continued demand for generative AI products. This indicates IBM's success in developing and commercializing innovative AI solutions.

The company invested $7.1 billion in acquisitions, primarily for the acquisition of HashiCorp, demonstrating a strategic focus on expanding capabilities through M&A.

The company returned $1.5 billion to shareholders through dividends, reflecting a commitment to returning capital to investors.

Total debt increased $8.3 billion, driven by first-quarter debt issuances to increase financial liquidity and plan for future debt maturities. This indicates a strategic approach to managing the capital structure.

Management acknowledges that the uncertain macroeconomic environment is impacting client spending, particularly on discretionary projects, and elongating the decision-making process on larger projects. This poses a risk to future revenue growth.

Movements in global currencies impacted reported revenue and profit, requiring management to adjust for currency effects to provide a clearer view of underlying performance. This ongoing volatility presents a challenge to financial results.

Management highlights the increasing importance of technology in driving cost efficiencies, productivity, and growth, particularly in hybrid cloud, automation, data sovereignty and on-prem solutions. This reflects a favorable market trend for IBM's offerings.