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IBM chief confident AI isn’t eroding other parts of the business
radub85 – stock.adobe.com
Chairman, president and CEO Arvind Krishna talks of growth and margin expansion as Big Blue expects artificial intelligence to deliver internal savings of $4.5bn this year
IBM expects to make $4.5bn in savings internally by scaling artificial intelligence (AI) initiatives. This is being achieved through a programme that Arvind Krishna, IBM’s chairman, president and chief executive officer, calls a “flywheel for growth and margin expansion”.
In prepared remarks for IBM’s second quarter 2025 earnings call, Krishna said the business had achieved $3.5bn of annual run-rate savings by the end of 2024, adding that it believed it could achieve close to $4.5bn in annual run-rate savings by the end of 2025.
Overall, IBM reported revenue of $17bn for the quarter, up by 8% on the same quarter last year. Meanwhile, annual recurring revenue from its software business grew to $22.7bn, up 10% on last year. That growth was led by containerisation and virtualisation platform OpenShift, which saw revenue rise by more than 20%.
Having completed the $6.4bn acquisition of HashiCorp during the second quarter, IBM said its automation business had grown by 14%. According to Krishna, IBM is now seeing early signs of synergy between HashiCorp’s Terraform product and Ansible, which it acquired as part of the acquisition of Red Hat in 2019.
Like other major enterprise tech providers, IBM has shifted its narrative away from digitisation to artificial intelligence (AI).
“AI remains a powerful driver of transformation for our clients and for IBM,” said Krishna. “Our generative AI book of business continues to accelerate and now stands at more than $7.5bn. With our strong first-half performance, we are raising our full-year outlook for free cash flow, which we expect to exceed $13.5bn.”
Deutsche Telekom is a recent customer win for IBM. The telco selected IBM Concert, an AI-powered tool that enables intelligent automation in patch management and the orchestration of security-related activities.
Discussing the benefits of the IBM AI tool, Peter Leukert, group CIO of Deutsche Telekom, said: “Secure operating systems form the foundation for all applications, databases and services that we offer our customers. When it comes to patching, the time factor has taken on a critical role in the AI era. Those who use available updates immediately and automatically can reduce security risks. We face this challenge together with our partner.”
“AI remains a powerful driver of transformation for our clients and for IBM. Our generative AI book of business continues to accelerate and now stands at more than $7.5bn”
Arvind Krishna, IBM
While the quarterly results show that IBM’s business has benefited from customers wanting to deploy AI, questions have been raised over whether the is cannibalising its business.
In the transcript of the company’s earnings call posted on Motley Fool, Krishna discussed the small amount of pricing pressure that comes when organisations consider any technology a commodity over when it is perceived as innovative. He said the main area of attention is how to reduce operational costs to allow for greater software investment.
“People are looking at internal labour expenses and third-party labour expenses. They’re looking to decrease those to make room for what they’re doing around software,” he said.
According to Krishna, the AI being built into the IBM product portfolio makes its products better and more competitive against rival products.
He noted that IBM’s consulting business needed to focus on transformative projects and work with partners such as SAP, Oracle and Palo Alto Networks. “Consulting is a big piece of the AI book of business, which is coming, because people are directing their dollars [consulting on AI] as opposed to alternate forms of consulting. And that is why it’s really important to be focused on what we call transformative projects, which include AI.”
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