International Business Machines Corporation IBM is benefiting from healthy growth in the software segment. In the third quarter, the company reported revenue of $7.21 billion, compared to $6.52 billion in the previous year’s quarter. Net profit improved to $2.37 billion from $1.97 billion a year ago, with margins of 32.9% and 30%, respectively.
The growth was driven by the strength of Automation, which grew 22% during the quarter. With growing digital transformation and AI integration initiatives across industries, companies are looking to optimize operations and automate infrastructure and workflows. IBM’s Automation portfolio provides end-to-end solutions that meet all requirements to ensure cost efficiency and increase resilience. By our estimate, IBM is expected to generate $7.6 billion in revenue, representing 16.3% year-over-year growth.
Hybrid Cloud remains an important growth driver for the company. In the third quarter, it reported 12% year-on-year growth. All three of IBM’s major subscription offerings gained market share. IBM’s hybrid approach allows users to choose the best option for their specific requirements.
Demand for Watsonx and Red Hat AI remains high. The Agentic platform, watsonx Orchestrate, is also gaining solid market traction. By our estimate, the company is expected to generate $7.67 billion in revenue from the Hybrid Cloud vertical, indicating 18.2% year-over-year growth.
The company is about to acquire Confluent, a leading data infrastructure company specializing in real-time data streaming. The combined capabilities of both entities will facilitate end-to-end integration of applications, analytics, data systems and AI agents, increasing resilience in hybrid cloud environments.
IBM faces competition from Microsoft Corporation MSFT and Oracle Corporation ORCL. In the November quarter, Oracle reported cloud revenues of $7.97 billion, up 34% year-over-year, while software revenues were $5.87 billion, down 3% year-over-year. The company achieved multiple customer wins in the past quarter. Milwaukee Tool and Qatar Airways recently chose to deploy Oracle Cloud.
During the quarter, Microsoft’s Productivity & Business Processes segment reported revenue of $33.02 billion, up 17% year over year. Growth was driven by healthy demand for M365 commercial products and cloud services and for M365 consumer products and cloud services. Microsoft’s high-margin software and cloud services deliver industry-leading profitability metrics, with operating margins consistently above 40%.
