Stagnation at the heart of IBM. The giant is hiding a serious problem

Klaudia Ciesielska
2 Min Read
Source: Unplash/Carson Masterson

IBM has consistently repositioned itself as an ‘AI-first’ company over the years, building a narrative around the integration of artificial intelligence with classic infrastructure. However, Q2 2025 results show that even the best-designed transformation may not solve deeper structural problems – particularly in the software area.

Although IBM exceeded analysts’ expectations in terms of total revenue (US$16.98 billion) and operating profits (US$2.80 per share), the company was unable to convince the market of the stability of growth in its most strategic business lines. The infrastructure segment – supported by growing demand for new AI-enabled mainframes – contributed USD 4.14 billion in revenue, one of the better performances of the quarter. But hardware wasn’t supposed to be IBM’s growth driver today.

Software, which has been the company’s most reliable revenue pillar for years, failed to deliver results at the level of expectations. The $7.39 billion in sales in this segment is a symbolic shortfall in forecasts, but significant in the context of IBM’s narrative as a provider of modern business solutions. The company points out that customers are shifting funds from transactional services – typically supported by software – to the purchase of new hardware, which temporarily distorts the demand picture. Except that this explanation does not address the deeper problem: innovation stagnation in software offerings.

The consulting division, on the other hand, recorded growth for the first time in six quarters (3%), showing that the market is looking for expertise in the area of AI. However, IBM itself is cautious in assessing how far this trend will translate into sustained growth.

It is worth noting that the company has not provided forecasts for the third quarter, continuing the policy of limited transparency initiated in April. This signals that management is not fully confident about the direction of demand in the short term.

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