IBM (NYSE:IBM) stock fell 7% (As on April 24, 11:23:54 AM UTC-4, Source: Google Finance) after the company posted higher than expected results for the first quarter of FY25. The net income from continuing operations was $1.05 billion or $1.12 per share compared with $1.57 billion or $1.69 per share in the year-ago quarter. Gross profit improved to $8.03 billion from $7.74 billion in the prior-year quarter, resulting in respective gross margins of 55.2% and 53.5% owing to a strong portfolio mix. Total expenses increased to $6.87 billion from $6.67 billion, driven by higher interest expense and R&D costs. During the first quarter, IBM generated $4.37 billion in cash from operations compared with $4.17 billion in the year-ago quarter. Free cash flow was $1.96 billion in the quarter, up from $1.91 billion in the prior-year period, driven by the combination of high revenue scale and productivity. As of March 31, 2025, the company had $11.04 billion in cash and cash equivalents and $56.37 billion of long-term debt.

Moreover, Software revenues improved to $6.34 billion from $5.9 billion, driven by growth in Hybrid Platform & Solutions, Red Hat, Automation, Data & AI and Transaction Processing with a strong focus on product innovation. This performance reflects increasing demand for a focused portfolio that provides end-to-end hybrid cloud and AI capabilities. Consulting revenues were $5.07 billion compared with $5.19 billion a year ago, owing to soft demand in some end markets and macroeconomic headwinds. Infrastructure revenues were $2.89 billion compared with $3.08 billion, due to lower demand in multiple markets. Financing revenues remained almost flat at $191 million.

IBM in the first quarter of FY25 has reported the adjusted earnings per share of $1.60, beating the analysts’ estimates for the adjusted earnings per share by 18 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 2 percent to $14.54 billion in the first quarter of FY25, beating the analysts’ estimates for revenue by $18 million. This uptick was driven by strong demand for hybrid cloud and AI, which aided growth in the Software segment.

Revenues for 2025 are likely to grow in the vicinity of 5% at constant currency. For the second quarter of 2025, management expects revenues to be in the range of $16.40 billion to $16.75 billion. For full-year 2025, the company expects free cash flow of $13.5 billion.