IBM Posts Strongest Mainframe and Software Growth in Decades as AI Strategy Pays Off

Record software revenue and mainframe resurgence highlight IBM’s shift toward hybrid cloud and enterprise AI.

IBM delivered one of its strongest financial performances in years in 2025, driven by a sharp rise in software revenue and renewed demand for its mainframe systems. The company reported its highest annual revenue from zSystems mainframes in more than two decades, alongside record growth in its software business.

For the full year ending December 31, IBM’s revenue rose 8% to $67.5 billion, while free cash flow reached its highest level in over ten years. Speaking during the company’s fourth-quarter earnings call, Chairman and CEO Arvind Krishna said results exceeded expectations across several areas, with software leading the charge.

Software now accounts for nearly 45% of IBM’s total business. Revenue from the segment grew 11% year over year to nearly $30 billion, marking the largest increase in the company’s history. “We are executing on our strategy to advance IBM as a software-led, hybrid cloud and AI platform company,” Krishna said. He added that generative AI bookings surpassed $12.5 billion, supported by both consulting and software demand.

IBM’s infrastructure business also saw a notable turnaround following the launch of its z17 mainframe in April. The AI-ready systems helped infrastructure revenue jump 21% in the fourth quarter, pushing mainframe sales to their best level in 20 years. CFO James Kavanaugh described IBM Z as “the backbone of enterprise IT,” highlighting its role in secure, scalable hybrid cloud environments.

As businesses adopt AI at scale, IBM is seeing growing demand for data sovereignty and on-premise control. Looking ahead, Krishna said, “50% of the enterprise usage of AI is going to be in either a private cloud or in their own data centers.”

With strong software momentum, modernized mainframes, and a clear focus on hybrid cloud AI, IBM is positioning itself as a long-term technology partner for global enterprises.