Technology and consulting giant IBM (NYSE:IBM) reported Q4 CY2025 results beating Wall Street’s revenue expectations , with sales up 12.1% year on year to $19.69 billion. Its non-GAAP profit of $4.52 per share was 5.4% above analysts’ consensus estimates.

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Revenue: $19.69 billion vs analyst estimates of $19.21 billion (12.1% year-on-year growth, 2.5% beat)

Adjusted EPS: $4.52 vs analyst estimates of $4.29 (5.4% beat)

Adjusted EBITDA: $6.5 billion vs analyst estimates of $6.19 billion (33% margin, 5.1% beat)

2026 Guidance: "We enter 2026 with momentum and in a position of strength, giving us confidence in our full-year expectations of more than 5 percent constant currency revenue growth and an increase of about $1 billion in year-over-year free cash flow"

Operating Margin: 21.1%, down from 22.3% in the same quarter last year

Free Cash Flow Margin: 32.9%, down from 35.1% in the same quarter last year

Market Capitalization: $274.7 billion

"In the fourth quarter, we delivered strong revenue growth, with double-digit Software performance. Additionally, Infrastructure continued its double-digit revenue growth with the robust adoption of the next generation of our mainframe platform. Our generative AI book of business now stands at more than $12.5 billion. This capped a strong 2025 for IBM where we exceeded expectations for revenue, profit and free cash flow," said Arvind Krishna, IBM chairman, president and chief executive officer.

With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE:IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $67.54 billion in revenue over the past 12 months, IBM is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. For IBM to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, IBM’s sales grew at a mediocre 4.1% compounded annual growth rate over the last five years. This shows it couldn’t generate demand in any major way and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. IBM’s annualized revenue growth of 4.5% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

IBM also breaks out the revenue for its most important segment, Software. Over the last two years, IBM’s Software revenue averaged 9.3% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.

This quarter, IBM reported year-on-year revenue growth of 12.1%, and its $19.69 billion of revenue exceeded Wall Street’s estimates by 2.5%.

Looking ahead, sell-side analysts expect revenue to grow 4% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its newer products and services will not catalyze better top-line performance yet.

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IBM has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 14.6%.

Looking at the trend in its profitability, IBM’s operating margin rose by 4.9 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q4, IBM generated an operating margin profit margin of 21.1%, down 1.2 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

IBM’s EPS grew at a remarkable 11.1% compounded annual growth rate over the last five years, higher than its 4.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of IBM’s earnings can give us a better understanding of its performance. As we mentioned earlier, IBM’s operating margin declined this quarter but expanded by 4.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For IBM, its two-year annual EPS growth of 9.7% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, IBM reported adjusted EPS of $4.52, up from $3.92 in the same quarter last year. This print beat analysts’ estimates by 5.4%. Over the next 12 months, Wall Street expects IBM’s full-year EPS of $11.57 to grow 6.1%.

It was encouraging to see IBM beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Full-year 2026 guidance calling for at least 5% constant-currency revenue growth and $1 billion of free cash flow was also encouraging. Overall, this print had some key positives. The stock traded up 7.9% to $317.48 immediately after reporting.

IBM put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.