IBM’s Q4 performance was marked by growth in software and infrastructure, which drove the company to surpass Wall Street’s revenue and profit expectations. Management credited the momentum to strong demand for AI- and automation-centric solutions, as well as continued adoption of its Z17 mainframe platform. CEO Arvind Krishna noted that “software grew 9%, our highest annual growth rate in history,” highlighting the impact of IBM’s focus on hybrid cloud and AI. Consulting services also contributed modestly, with clients increasingly seeking help to integrate AI at scale.

Is now the time to buy IBM? Find out in our full research report (it’s free for active Edge members).

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 From IBM’s Q4 Earnings Call

• Brent Thill (Jefferies) asked about the components driving double-digit software growth. CEO Arvind Krishna explained that automation and data segments are seeing secular demand increases, with strong results from HashiCorp and Apptio, and ongoing expansion in Red Hat OpenShift.
• Amit Daryanani (Evercore ISI) pressed for clarity on the drivers of strong free cash flow and the outlook for high single-digit growth this year. CFO Jim Kavanaugh attributed the strength to operating leverage, disciplined capital allocation, and continued momentum in adjusted EBITDA.
• Ben Reitzes (Melius Research) focused on the growth outlook for Red Hat and its impact on overall software guidance. Kavanaugh responded that Red Hat is expected to continue double-digit growth, supported by subscription revenue and new innovation in hybrid cloud and AI.
• Wamsi Mohan (Bank of America) inquired about the potential impact of rising memory costs on server and hybrid cloud demand. Krishna acknowledged memory price pressures but emphasized that AI demand and market share gains should offset any adverse effects on the Linux business.
• Eric Woodring (Morgan Stanley) questioned the sustainability of mainframe momentum and infrastructure guidance. Krishna pointed to structural factors such as on-premise control, improved developer tools, and integrated AI as drivers of enduring demand, while being cautious about product cycle variability.

Catalysts in Upcoming Quarters

Going forward, the StockStory team will closely watch (1) the pace of integration and synergy realization from the Confluent acquisition, (2) ongoing adoption rates and monetization of IBM’s AI and automation platforms, and (3) the conversion of consulting backlog into revenue, especially for AI-related projects. Execution on margin expansion and effective management of acquisition-related dilution will also be important markers of progress.

IBM currently trades at $294.73, in line with $294.16 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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