In the first six months of 2025, the company completed six acquisitions, including HashiCorp, for an aggregate purchase price of $8,887 million. These acquisitions are expected to enhance IBM’s portfolio of products and services, further advancing its hybrid cloud and AI strategy.

Software revenue for Q2 2025 grew 9.6% (7.6% adjusted for currency), with Hybrid Cloud (Red Hat) revenue accelerating 16.1% (14.4% adjusted for currency) and Automation revenue growing 16.2% (14.4% adjusted for currency). This reflects continued growth in the high-value annual recurring revenue base and contributions from recent acquisitions.

Infrastructure revenue increased 13.6% (11.5% adjusted for currency) in Q2 2025, reflecting early strength from the new IBM z17 launch, which saw IBM Z revenue increase 70.2% (67.1% adjusted for currency). The company also announced Power11 in July, signaling continued investment in mission-critical data-intensive workloads.

Management's focus on productivity actions, alongside an improving portfolio mix, led to a 2.0 percentage point increase in total gross profit margin to 58.8% in Q2 2025. This indicates effective operational management and cost optimization efforts.

Consulting revenue was flat year-over-year (0.2% reported, (0.4)% adjusted for currency) for the six months ended June 30, 2025, as clients continued to delay decision-making in discretionary projects. Despite this, the segment maintained a book-to-bill ratio over 1.14 for the trailing twelve months, demonstrating continued demand and backlog growth.

Research and development (R&D) expense increased 13.9% year-over-year in Q2 2025 to $2,097 million, primarily driven by investments in AI, hybrid cloud, and quantum technologies. This reflects management's commitment to driving innovation and future growth.

The enactment of H.R. 1 on July 4, 2025, which includes the permanent extension of key tax measures, is expected to result in a one-time, non-cash charge in Q3 2025. This charge will primarily be for the remeasurement of deferred tax assets and liabilities related to GILTI (now NCTI), though it is not expected to impact operating non-GAAP net income or EPS.

Movements in global currencies continued to impact reported year-to-year revenue and profit in the first six months of 2025. While hedging programs are in place, they defer rather than eliminate currency volatility, leading to higher net exchange losses of $171 million in Q2 2025.

The company is involved in various legal proceedings, including a class action lawsuit regarding pension benefits and ongoing tax examinations in Brazil and the U.S. While management believes the likelihood of material loss is remote for most matters, the ultimate outcome of such complex and novel legal theories remains uncertain.

The company gained market share across its key Hybrid Cloud solutions, with OpenShift growing revenue more than 20 percent. This indicates a strengthening competitive position in critical growth areas within the Software segment.

IBM's hybrid cloud and AI strategy continues to position the company to deliver sustainable and profitable growth. Management emphasizes that technology serves as a key competitive advantage, allowing businesses to scale, drive efficiencies, and fuel growth, particularly with new offerings like IBM watsonx.

The early strength of the new IBM z17 platform, which saw IBM Z revenue increase 70.2% in Q2 2025, highlights the enduring nature of the IBM Z platform and its value for AI workloads and hybrid cloud architecture, reinforcing IBM's competitive standing in the mainframe market.

The company's gross profit margin increased by 2.0 percentage points to 58.8% in Q2 2025, and operating (non-GAAP) gross margin increased 2.3 points to 60.1%, primarily due to productivity actions and an improving portfolio mix. This demonstrates effective cost management and operational streamlining.

Operating (non-GAAP) SG&A expense for the six months ended June 30, 2025, decreased by 1.6% year-over-year, primarily due to benefits from productivity actions focused on transforming enterprise operations (5 points). This indicates successful efforts to reduce overhead and improve efficiency.

The company is continuing to optimize its supply chain by shifting Distributed Infrastructure manufacturing to an industry standard strategic partner. This initiative aims to pivot to a simpler, more efficient process, which could further enhance operational efficiency.

Research and development (R&D) expense increased 13.9% year-over-year in Q2 2025 to $2,097 million, primarily driven by investments to drive innovation in AI, hybrid cloud, and quantum computing. This demonstrates a strong commitment to advancing core technological capabilities.

The launch of IBM z17 in June 2025, delivering enhanced AI acceleration, and the announcement of IBM Power11 in July, featuring advancements in processor and hardware architecture, highlight the company's continuous innovation in critical technology areas.

IBM is leveraging its AI offerings, including IBM watsonx, to help clients drive operational efficiency and reduce costs, and is also embedding AI in its own workflows to optimize supply chain and service delivery. This dual focus on internal and external AI transformation underscores its commitment to digital leadership.

Total debt increased by $9,192 million ($7,244 million adjusted for currency) from December 31, 2024, to June 30, 2025, primarily driven by $8,385 million in debt issuances in Q1 2025. This capital raise was intended to increase financial liquidity and plan for future debt maturities, as well as support acquisitions.

The company invested $7,845 million in acquisitions during the first six months of 2025, with a significant portion allocated to the HashiCorp acquisition. This demonstrates a clear priority on inorganic growth to enhance the company's portfolio.

IBM returned $3,112 million to shareholders through dividends in the first six months of 2025, and the Board of Directors approved a quarterly dividend of $1.68 per common share payable in Q3 2025. This indicates a continued commitment to its long-standing dividend policy, despite the suspension of share repurchases.

The IBM Board of Directors adopted amendments to its By-Laws, effective July 24, 2025, to address universal proxy rules and clarify procedural and informational requirements for stockholder nominations. These changes aim to improve corporate governance and transparency.

The company's pension plans remain well-funded, with worldwide qualified plans funded at 116% at the end of 2024. Total contributions for all retirement-related plans are expected to be approximately $1.3 billion in 2025, essentially flat compared to 2024, indicating stable long-term employee benefit management.

The filing acknowledges 'adverse effects related to climate change and other environmental matters' and 'labor and employment issues' as potential risks. While specific initiatives are not detailed in this 10-Q, the disclosure indicates awareness of these broader ESG considerations.

Management noted that the 'current economic and trade environment remains dynamic,' leading clients to prioritize 'cost-efficient, high-impact technology investments' and delay decision-making, particularly in discretionary projects, affecting Consulting segment revenue.

Movements in global currencies continued to impact reported year-to-year revenue and profit in the first six months of 2025. Despite hedging programs, the company does not hedge 100% of exposures, leading to net exchange losses of $171 million in Q2 2025, highlighting ongoing foreign exchange risk.

The company believes that 'technology continues to serve as a key competitive advantage which allows businesses to scale, drive cost efficiencies, productivity, and to fuel growth and transformation,' with hybrid cloud, automation, data sovereignty, and on-prem solutions becoming increasingly critical. This positive industry trend supports IBM's strategic focus.