IBM’s management has highlighted several non-GAAP metrics that investors should track in the quarter ended December 2025. Free cash flow guidance for the full fiscal year was raised to $14 billion, driven by year‐to‐date free cash flow rising from $6.6 billion to $7.2 billion. Backlog levels in the hybrid cloud and consulting segments expanded 8% year‐over‐year, reflecting multi‐year contract wins with three global banks and two European telecom operators. Deferred revenue in the software division climbed 12% from a year earlier, underpinned by new subscriptions to the watsonx.ai platform.

Software revenues are expected to reaccelerate, with Jefferies analysts projecting mid‐single‐digit growth driven by momentum in watsonx.ai deployments and the closing of the Confluent acquisition. Consulting services continued robust expansion, with management reporting year‐over‐year growth of 9% in the prior quarter on the back of AI‐driven tools and an expanded Microsoft partnership delivering AI advisory work to 150 clients. Infrastructure services showed stability, with monthly recurring revenues up 3% versus the prior year, as enterprises maintained hybrid cloud architectures and migrated legacy workloads at a measured pace.

Analysts maintain a Buy recommendation based on a targeted mid‐teens total return over the next twelve months. Key catalysts include: full integration of Confluent’s streaming data platform, which could unlock an estimated $500 million in incremental software bookings by fiscal 2027; accelerated adoption of watsonx.ai in regulated industries such as financial services and healthcare; and continued margin expansion driven by operating‐leverage improvements in consulting and software. With management guiding to over 5% annual free cash flow growth for a fourth consecutive year, IBM’s cash‐return programs and strategic M&A pipeline remain focal points for shareholders.