IBM's Strong Future
IBM is one of the oldest technology companies in the world, with roots going back to 1911 when it was incorporated as the Computing‑Tabulating‑Recording Company. Even after more than a century, it has weathered two world wars, the dot-com bubble, the Covid pandemic, and many recessions. Its track record of surviving economic ups and downs is a testament to the company.
IBM may not be as “mainstream” in the consumer eye as some other large tech companies, but it is recognised for innovation in areas including AI and quantum computing.
In its recent Q3 2025 report, IBM delivered strong results: its revenue for the quarter reached approximately US$16.3 billion, representing about a 9 % year-over-year increase. The company also reported about US$14.9 billion in cash, restricted cash and marketable securities at the end of the quarter.
In this short article, I’m going to give you my reasoning as to why I believe IBM will continue to thrive in this technology era.
How does IBM make their money?
IBM provides three key services:
- Software
- Consultancy
- Hardware
Software
IBM has been rapidly expanding its software stack. With its recent acquisition of HashiCorp, the company is gaining a powerful foothold in the Infrastructure as Code (IaC) market.
To give some context: IBM has made two major strategic acquisitions in this space — Red Hat, acquired in 2018, and HashiCorp, announced in 2024 and finalised in 2025. Both companies hold significant positions in the IaC and automation ecosystem: Red Hat with Ansible and HashiCorp with Terraform. Together, they give IBM a strong, end-to-end position in the growing IaC market, which continues to expand as more organisations move toward programmatic development and deployment.
In addition to IaC, the HashiCorp acquisition also strengthens IBM’s cybersecurity portfolio through tools like Vault, a leading secrets-management solution. Combined with IBM’s existing security software and services, it’s likely the company will continue to deepen its investments in cybersecurity — an industry growing rapidly as cyberattacks become more frequent and costly for businesses worldwide.
Red Hat remains a dominant player in commercial Linux distributions, particularly with Red Hat Enterprise Linux (RHEL), which integrates Security-Enhanced Linux (SELinux) — a module originally developed by the NSA to improve kernel-level security. This combination has made RHEL a trusted platform in enterprise environments that require robust security and stability.
And, of course, no discussion about IBM would be complete without mentioning AI. IBM’s WatsonX platform is an enterprise-grade AI and data platform that allows businesses to build, train, and deploy custom AI models. It’s a key part of IBM’s broader strategy to empower enterprises with responsible and explainable AI solutions.
In Q3 2025, IBM’s software segment revenue grew 10% year-over-year (9% at constant currency), reaching approximately $7.2 billion, according to its official financial report. The company’s overall gross profit margin stood at 57.3% (non-GAAP 58.7%), reflecting continued strength in its high-margin software and consulting businesses.
Consultancy
At the moment, IBM is among the largest technical consultancy-firms in the tech industry, as shown by this graph. They leverage their expertise to provide strategic advice for ideation, creation, and a broad range of services.
Although growth was modest — their consulting segment grew by 3% (reported) or 2% at constant currency in Q3 2025. Even so, steady growth of consultants during a period marked by hiring freezes and layoffs remains a strong signal.
I believe the consultancy industry could expand much further — I’ll explain why shortly.
In Q3 2025, IBM’s consulting segment delivered revenue of roughly US$5.3 billion, and the segment’s gross profit margin was 29.3%.
Infrastructure
Mainframes are incredibly fast transaction-processing machines, typically used by large enterprises—especially banks—that handle very high volumes of transactions. The IBM Z systems hold a significant position in this market: in Q3 2025, IBM’s infrastructure segment (which includes Z systems) saw revenues up 17% year-over-year, or 15% at constant currency. Moreover, “IBM Z” within hybrid infrastructure grew 61% (59% cc) in that quarter.
Nevertheless, I was not able to confirm publicly that Z systems held exactly 64% market share in 2024, or that 71% of Fortune 500 companies use Z systems, or that 90% of all credit-card transactions are handled by IBM systems with credible data. Market-reports suggest the global mainframe market is relatively small (for example, about USD 2.7 billion in 2024) and that mainframes still play a strong but niche role.
There is a growing concern that enterprises may migrate away from on-premises mainframe technology toward cloud computing. One example: in September 2022, FedEx announced plans to close its data-centres and mainframes by 2024 in favour of going “all-in” on cloud.
In Q3 2025, IBM’s infrastructure segment delivered strong growth (17% reported, 15% cc) with a gross margin of 18.1% for that segment
Why will IBM continue to grow?
Improvement in Software Portfolio via Acquisition and Development
IBM’s software portfolio continues to expand significantly — through both internal development and strategic acquisitions. For example, IBM recently announced plans to acquire Applications Software Technology LLC in early 2025 to bolster its Oracle-cloud application capabilities. With each strong business added, the effect compounds — setting the stage for greater revenue growth down the line.
At the same time, cybersecurity is becoming a board-room priority. While it doesn’t grab as many headlines as AI, companies are investing more in defence after successive high-profile attacks. This growing spend underscores that cybersecurity is a fast-growing sector — and IBM is well placed to benefit given its platform, services and software strengths.
Continued development & innovation in the AI sector
IBM is already performing strongly in the AI sector. With its long legacy in R&D and its own data-centre and cloud infrastructure, I believe the company is well-positioned to either make major future advancements in AI or consolidate its current offerings into a best-in-class product suite — notably WatsonX. Their announcement of partnerships involving WatsonX and their quantum-AI experiments supports this direction.
Continued development & innovation in the Quantum sector
IBM is one of the leaders in quantum computing, continually pushing the boundaries of research and development. The company is often described as a powerhouse in R&D — competing with the likes of Google and Microsoft despite their larger market valuations. I believe that IBM will remain one of the key pioneers in quantum technology, partly because very few players are operating at its scale and ambition right now.
Increasing desire for consultancy
I think consultancy could grow into a much bigger industry. As AI continues to improve, there will likely be less need for lower-level staff, since AI will be able to handle much of that work in the near future. However, there will still be a strong demand for senior leaders.
AI could also make onboarding consultants significantly faster, with intelligent agents assisting in answering queries about a business through an interconnected organisational knowledge base. As a result, consultancy work will become more streamlined and efficient, making the industry even more attractive overall.
Final Thoughts
But hey, I’m no financial guru or investment broker. I simply read their recent earnings, looked at what industries they’re working in, and used my life experience to make this judgment call.
We’ll see if I’m right or wrong about this.
Wednesday, 5th November 2025
