IBM reports Q4 revenue of $16.7B, up 6% YoY, and net income up 72% YoY to $2.3B, after spinning off of its managed infrastructure services unit Kyndryl
covid, markets, crypto, ukraine, china, even NFL playoffs this wknd gave me a heart attack every 5m. damn kids get off my #@%! lawn. 👴🏼😠🙈 https://twitter.com/... Patrick Moorhead / @patrickmoorhead : Here's how the $IBM topline segments break out: -Software: +8% @ 89% GM -Consulting: +13% @ 27% GM -Infra: Flat; good given Z cycle hasn't hit; @ 55% GM -Financing: -29%; Lower than I expected Notables: -"cloud" revenue +19% -Red Hat +21% https://twitter.com/...
Context & Ripple Effects
This is IBM's first full quarter as a slimmer company: the spin-off of managed-infrastructure services into Kyndryl removed the low-margin outsourcing drag, and the remaining business immediately showed its new shape — software up 8% at an 89% gross margin, consulting up 13%, with Red Hat growing 21% as the hybrid-cloud engine.
The arc since then confirms the mix shift stuck: software grew from $5.77B in the following Q1 to $7.51B by Q4 2024, and by late 2025 Hybrid Cloud including Red Hat had become the line investors scrutinize most closely — big enough that even a beat on total revenue sent the stock down when that unit grew slower than expected.
First-order effects
- Investors get their first clean read on post-spin IBM economics: software at 89% gross margin and consulting at 27% now carry the P&L, while flat infrastructure results are tolerated because the Z-systems refresh cycle hasn't arrived yet.
- Kyndryl shareholders and IBM's remaining customers face a clean split — legacy managed infrastructure sits with one company, hybrid-cloud software and consulting with the other.
Second-order effects
- Consulting growing 13% puts IBM back in direct competition with the big consulting-led integrators for enterprise transformation budgets, while Red Hat's 21% growth makes OpenShift the wedge into rivals' installed bases.
- Financing revenue falling 29% signals IBM is de-emphasizing balance-sheet-heavy hardware deals, pushing customers toward subscription software consumption instead.
Third-order effects
- If the pattern holds, IBM completes its decades-long structural migration from hardware-and-services conglomerate to software-led hybrid-cloud vendor — and the market reprices accordingly, judging each quarter primarily on software and Hybrid Cloud growth rather than headline revenue.
The trend: IBM's post-Kyndryl arc is a case study in enterprise IT incumbents converting low-margin services scale into high-margin software franchises, with hybrid cloud as the bridge.