IBM also has ongoing work in microchip design, seeking to build semiconductor solutions that are faster and more energy-efficient -- crucial for the AI trend.
IBM's journey to achieve its vision hasn't been as simple as divesting non-core assets. The company has also been on an acquisition spree in recent years. In 2023 and 2024, IBM acquired 20 companies for a total price of almost $9 billion. In the first quarter of 2025, it acquired three more companies for an additional $8 billion.
IBM is chasing some important secular trends, which could ultimately be rewarding for shareholders. That said, completely reimagining the business through a series of acquisitions and divestitures can be a complicated strategy to pull off.
Is IBM profitable?
IBM is a profitable business, continually reporting net income on a trailing-12-month basis for over 30 years. Still, IBM's financials deserve a fresh look, considering all of the changes it's undergone in recent years.
IBM's software business has grown faster in comparison to its consulting and infrastructure businesses, accounting for roughly two-thirds of the profits in the first quarter of 2025. In other words, there's good reason to believe the company's overall profits can grow because its best growth supplies most of the profits.
As IBM's software business continues to take off, the company's cash flows are improving. However, investors do need to be aware that some of these cash flows are being poured right back into the business for research and development and acquisitions.
IBM is adapting its business to better address the global growth trends in cloud and AI. However, these spaces are highly competitive and subject to rapid changes as technology advances at breakneck speeds. It's imperative to spend money to stay ahead of the curve, a common need for tech stocks.
In summary, IBM is a profitable business, and its future cash-flow potential is promising. Investors must be aware that the company could find itself spending more money than anticipated to stay relevant in a rapidly advancing world.
