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International Business Machines (IBM - Free Report) reported strong third-quarter 2025 results, with adjusted earnings and revenues beating the Zacks Consensus Estimate. IBM also boosted its guidance amid the ongoing artificial intelligence boom. Still, the stock dropped 0.9% on Oct. 23, 2025, after reporting earnings.
Quarterly total revenues increased to $16.33 billion from $14.97 billion. The top line exceeded the consensus estimate of $16.1 billion. Excluding non-recurring items, non-GAAP net income from continuing operations was $2.65 per share compared with $2.30 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 21 cents.
The company witnessed healthy demand trends for hybrid cloud and artificial intelligence (AI) solutions with a client-focused portfolio and broad-based growth. IBM CEO Arvind Krishna also said the company’s AI book of business has surpassed $9.5 billion, up from $7.5 billion in the second quarter, as quoted on CNBC.
Why IBM Shares Fell?
However, shares fell due to soft growth for the Red Hat software business, per Bloomberg, as quoted on CNBC TV18. Third-quarter sales in the hybrid cloud unit that includes Red Hat rose 14%, marking a slowdown from the previous period and below analysts’ average estimate of 16%, per the above-mentioned Bloomberg article.Transaction Processing fell 1% in the quarter.
IBM shares have advanced 29.6% so far this year, thanks to investor optimism about its software division, driven by acquisitions like Red Hat and HashiCorp. HashiCorp's capabilities drive considerable synergies across several areas for IBM, including Red Hat, watsonx, data security, IT automation and Consulting. Hence, the latest slowdown in the software segment acted as a slight negative.
Raised Guidance
IBM lifted its revenue guidance and said that it expects “more than” 5% revenue growth, up from “at least” 5%. The free cash flow for the year is expected to touch $14 billion, up from a $13.5-billion estimate last quarter.
ETFs in Focus
Against this mixed backdrop, investors may want to invest in the IBM stock via the basket approach. The basket approach minimizes the company-specific concentration risks.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)
First Trust NASDAQ Technology Dividend Index Fund provides exposure to dividend payers within the technology and telecommunication sector by tracking the Nasdaq Technology Dividend Index. IBM makes up 8.6% of the fund’s assets.
FT Vest Technology Dividend Target Income ETF (TDVI - Free Report)
FT Vest Technology Dividend Target Income ETF is an actively managed fund that seeks to invest in U.S. securities contained in the Nasdaq Technology Dividend Index and utilize an "option strategy" consisting of writing(selling) call options on the Nasdaq-100 Index and/or the S&P 500 Index, or ETFs that track the Nasdaq-100 Index or the S&P 500 Index. The ETF invests 8.56% of its assets in IBM.
AXS Green Alpha ETF is an actively managed portfolio seeking long-term capital appreciation. It invests in Next Economy companies selected by Green Alpha Investments for their attractive growth prospects and demonstrates a commitment to promoting a sustainable environment and economy. IBM takes 5.8% of the fund.
The underlying S&P Sector-Neutral High Yield Dividend Aristocrats Index includes large, mid and small-cap companies in the S&P Composite 1500 Index that have increased or maintained their dividend for seven or more consecutive years while seeking to mirror the sector weights of the S&P Composite 1500 Index. IBM takes about 6% of the fund.
Pacer US Cash Cows Growth ETF is a strategy-driven ETF that aims to provide capital appreciation over time by screening the S&P 900 Pure Growth Index for the top 50 companies based on free cash flow yield. IBM takes 5.7% of the fund.
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ETFs in Focus on IBM's Q3 Earnings
International Business Machines (IBM - Free Report) reported strong third-quarter 2025 results, with adjusted earnings and revenues beating the Zacks Consensus Estimate. IBM also boosted its guidance amid the ongoing artificial intelligence boom. Still, the stock dropped 0.9% on Oct. 23, 2025, after reporting earnings.
Quarterly total revenues increased to $16.33 billion from $14.97 billion. The top line exceeded the consensus estimate of $16.1 billion. Excluding non-recurring items, non-GAAP net income from continuing operations was $2.65 per share compared with $2.30 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 21 cents.
The company witnessed healthy demand trends for hybrid cloud and artificial intelligence (AI) solutions with a client-focused portfolio and broad-based growth. IBM CEO Arvind Krishna also said the company’s AI book of business has surpassed $9.5 billion, up from $7.5 billion in the second quarter, as quoted on CNBC.
Why IBM Shares Fell?
However, shares fell due to soft growth for the Red Hat software business, per Bloomberg, as quoted on CNBC TV18. Third-quarter sales in the hybrid cloud unit that includes Red Hat rose 14%, marking a slowdown from the previous period and below analysts’ average estimate of 16%, per the above-mentioned Bloomberg article.Transaction Processing fell 1% in the quarter.
IBM shares have advanced 29.6% so far this year, thanks to investor optimism about its software division, driven by acquisitions like Red Hat and HashiCorp. HashiCorp's capabilities drive considerable synergies across several areas for IBM, including Red Hat, watsonx, data security, IT automation and Consulting. Hence, the latest slowdown in the software segment acted as a slight negative.
Raised Guidance
IBM lifted its revenue guidance and said that it expects “more than” 5% revenue growth, up from “at least” 5%. The free cash flow for the year is expected to touch $14 billion, up from a $13.5-billion estimate last quarter.
ETFs in Focus
Against this mixed backdrop, investors may want to invest in the IBM stock via the basket approach. The basket approach minimizes the company-specific concentration risks.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report)
First Trust NASDAQ Technology Dividend Index Fund provides exposure to dividend payers within the technology and telecommunication sector by tracking the Nasdaq Technology Dividend Index. IBM makes up 8.6% of the fund’s assets.
FT Vest Technology Dividend Target Income ETF (TDVI - Free Report)
FT Vest Technology Dividend Target Income ETF is an actively managed fund that seeks to invest in U.S. securities contained in the Nasdaq Technology Dividend Index and utilize an "option strategy" consisting of writing(selling) call options on the Nasdaq-100 Index and/or the S&P 500 Index, or ETFs that track the Nasdaq-100 Index or the S&P 500 Index. The ETF invests 8.56% of its assets in IBM.
AXS Green Alpha ETF (NXTE - Free Report)
AXS Green Alpha ETF is an actively managed portfolio seeking long-term capital appreciation. It invests in Next Economy companies selected by Green Alpha Investments for their attractive growth prospects and demonstrates a commitment to promoting a sustainable environment and economy. IBM takes 5.8% of the fund.
SPDR Portfolio S&P Sector Neutral Dividend ETF (SPDG - Free Report)
The underlying S&P Sector-Neutral High Yield Dividend Aristocrats Index includes large, mid and small-cap companies in the S&P Composite 1500 Index that have increased or maintained their dividend for seven or more consecutive years while seeking to mirror the sector weights of the S&P Composite 1500 Index. IBM takes about 6% of the fund.
Pacer US Cash Cows Growth ETF (BUL - Free Report)
Pacer US Cash Cows Growth ETF is a strategy-driven ETF that aims to provide capital appreciation over time by screening the S&P 900 Pure Growth Index for the top 50 companies based on free cash flow yield. IBM takes 5.7% of the fund.