IBM’s first quarter performance in 2025 saw flat year-over-year sales, yet outpaced revenue and profit expectations set by Wall Street. Despite this, shares declined following the release as management acknowledged ongoing uncertainty and variability in client demand, particularly in consulting. CEO Arvind Krishna cited “solid revenue growth, profitability, and cash flow generation,” emphasizing the strength of IBM’s hybrid cloud and artificial intelligence (AI) strategy. Growth in software, especially through platforms like Red Hat and generative AI offerings, helped offset weakness in other segments. Management noted that while technology investments continue, discretionary projects in consulting remain susceptible to client delays and budget scrutiny.

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While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions IBM’s Q1 Earnings Call

• James Schneider (Goldman Sachs) asked about macro impacts on software and consulting segments; CEO Arvind Krishna said software consumption remained resilient but consulting is more sensitive to discretionary pullbacks, and CFO Jim Kavanaugh reiterated a cautious outlook for consulting.

• Wamsi Mohan (Bank of America) pressed for details on achieving the 5%+ annual growth target; Kavanaugh explained the role of software momentum, infrastructure innovation, and M&A in offsetting consulting weakness.

• Amit Daryanani (Evercore ISI) inquired about federal consulting exposure and discretionary project risks; Kavanaugh clarified U.S. federal consulting is less than 10% of total consulting, and most work is mission-critical rather than optional.

• Ben Reitzes (Melius Research) questioned the sequential slowdown in Red Hat growth and the outlook for virtualization; Kavanaugh highlighted strong bookings and a growing pipeline, while Krishna described virtualization as a platform expansion opportunity.

• Erik Woodring (Morgan Stanley) asked why free cash flow guidance was not raised despite currency tailwinds and strong margins; Kavanaugh said management is being conservative given macro uncertainty and prefers to focus on execution.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will watch (1) the adoption and client feedback for the new z17 mainframe, (2) the pace of Red Hat and generative AI platform growth as signposts for sustained software momentum, and (3) the resilience of consulting demand amid macroeconomic headwinds and discretionary project delays. Integration outcomes from the HashiCorp acquisition and the impact of ongoing productivity initiatives will also be critical markers of IBM’s progress.

IBM currently trades at $284.89, up from $245.21 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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