International Business Machines Corporation

Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I will turn the meeting over to Olympia McNerney, IBM's Global Head of Investor Relations. Olympia, you may begin.

Thank you. I'd like to welcome you to IBM's third quarter 2025 earnings presentation. I'm Olympia McNerney, and I'm here today with Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, and Jim Cavanaugh, IBM's Senior Vice President and Chief Financial Officer. We'll post today's prepared remarks on the IBM Investor website within a couple of hours, and a replay will be available by this time tomorrow. To provide additional information to our investors, our presentation includes certain non-GAAP measures. For example, all of our references to revenue and signings growth are at constant currency. We provided reconciliation charts for these and other non-GAAP financial measures at the end of the presentation, which is posted to our investor website. Finally, some comments made in this presentation may be considered forward-looking under the Private Securities Litigation Reform Act of 1995. These statements involve factors that could cause our actual results to differ materially. Additional information about these factors is included in the company's SEC filings. So with that, I'll turn the call over to Aravind.

Thank you for joining us today. In the third quarter, IBM delivered strong results across revenue, profit, and free cash flow, exceeding our expectations. Revenue growth accelerated to 7%, our highest growth in several years, with all our segments accelerating sequentially. These results underscore the strength of our business model and portfolio, and the innovation we are delivering to clients. Clients continue to turn to IBM as a trusted partner to help them modernize, embed AI, and build resilient infrastructure. Let me touch on the economy before I turn to our execution. Last quarter, I said we had moved from being cautiously optimistic to optimistic. Technology remains a key driver of growth and competitive advantage. AI adoption is accelerating and hybrid cloud remains the foundation of enterprise IT. Clients are leaning on enterprise technologies to scale, innovate, and drive productivity. There are always macro uncertainties, but overall we continue to see broad-based demand from clients and remain optimistic. Now turning to our execution this quarter. Our strategy remains focused, hybrid cloud and artificial intelligence. Our products and services fuel growth and productivity for our clients. You can see this in our results for the quarter. Software growth accelerated to 9%, led by strength in automation. Automation was up 22%, highlighting our end-to-end portfolio of leading solutions that optimize operations, automate infrastructure and workflows, build resiliency, and drive cost efficiency for clients. Many of our automation products are infused with AI, enhancing their capabilities. HashiCorp also continues to accelerate within IBM, benefiting from our go-to-market distribution and joint product innovation, highlighting our synergy potential. Consulting accelerated, reflecting growing demand for AI services as clients need help designing, deploying, and governing AI at scale. And infrastructure-delivered robust performance, growing 15%, driven by continued strength in Z17, our strongest two-quarter launch in history. The SPIRE accelerator, which will be available in Q4, will bring advanced generative AI and real-time inferencing capabilities inside IBM Z, redefining how enterprises capture AI value within their most mission-critical environments. In addition to being a demand driver, AI is also a powerful productivity driver for IBM, contributing to our strong financial performance. In 2023, we set out on a goal to achieve $2 billion of productivity savings, and today we are well ahead of that with an expectation of $4.5 billion of annual run rate savings exiting this year. I believe we have significant opportunity ahead of us to continue to become even leaner and more nimble. Our client zero approach sets us apart as we have internally identified and addressed pain points on data readiness, siloed and vertical workflows, application and IT sprawl, using our own technology and domain expertise. Clients see these results and look to us to help them on their own transformations. driving over a thousand client zero engagements this year. The breadth of our AI offerings is a key differentiator, combining an innovative technology stack with consulting at scale and our client zero journey. Our GenAI book of business continues to show momentum at over $9.5 billion inception to date. In consulting, we are embracing disruption and leading the way with our digital asset and services as software strategy. While we are early in this journey, we have over 200 consulting projects using digital workers at scale. In software, demand for Watson X and Red Hat AI remains strong, with early momentum in our agentic platform, Watson X Orchestrate. Watson X Orchestrate helps enterprises deploy AI by connecting agents, models, and workflows, with governance and security. Orchestration will be critical as enterprises run a variety of models to optimize cost and performance. Our hybrid approach to models enables clients to use the best option for each use case, either as granite models, third-party models, or open models from HuggingFace, Meta, and Mistral. We recently launched Granite 4.0, our next generation family of open small language models. Granite 4.0 delivers high performance and cost efficiency using 70% less memory and offering twice the inferencing speed of conventional models. We also partnered with Anthropic to infuse Claude into IBM products to unlock new Gen AI features and capabilities. This week, we announced a partnership to run WatsonX on Grok. giving clients access to their inferencing technology, which provides ultra-high-speed, low-latency AI capabilities at lower costs. All this leads to real, tangible value for clients. Companies like Deutsche Telekom and SLP Global are embedding WatsonX into core workflows. In infrastructure, clients such as Nationwide, State Street, and Credit Agricole are turning to AI to manage increased workloads, and use Z17 for its advanced AI inferencing capabilities and enhanced resiliency. Accelerating innovation remains a core focus for IBM. At our recent IBM Tech Exchange Developer and Builder Conference, we showcased how we are helping clients and partners with innovation that blends enterprise strength and AI speed. We had almost twice the number of participants as last year, with speakers including United Airlines, T-Mobile, Prudential, UPS, Morgan Stanley, Verizon, and Cigna. We announced Project Bob, facilitating AI-powered software development, helping teams ship higher-quality code faster. We have more than 8,000 developers within IBM that are using Project Bob, reporting productivity gains averaging 45%. another powerful client zero use case. We also announced new automation capabilities, including a real-time infrastructure graph connecting applications, services, and ownership through HashiCorp Terraform. As outlined at our investor day, we are on a path to demonstrate the first error-corrected quantum computer by 2028 and continue to deliver key milestones in our quantum roadmap. As we collaborate with our ecosystem of over 280 partners, we are making tangible progress on near-term use cases. For example, HSBC achieved a notable improvement in bond trading predictions using IBM's Heron quantum processor. Vanguard announced a breakthrough in optimizing portfolio construction using IBM's quantum computing as a service. We recently announced a partnership with AMD to build quantum-centric supercomputing architectures, leveraging IBM's quantum expertise and AMD's CPUs, GPUs, and other accelerator technologies. Just last week, IBM and the Basque government unveiled Europe's first IBM Quantum System 2. This marks the second installation outside the United States and underscores our commitment to global leadership in quantum computing. In closing, we are executing on our strategy of accelerating revenue growth and delivering higher profitability. Given these results and the momentum in our portfolio, we are raising expectations for revenue growth to more than 5% and free cash flow to about $14 billion for the year. With that, let me hand it over to Jim to go through the financials.