radub85 – stock.adobe.com
Chairman Arvind Krishna, President and CEO of Big Blue, talks about growth and margin expansion. Big Blue expects that artificial intelligence will deliver internal savings of $4.5bn in this year.
IBM anticipates making $4.5bn of savings by scaling AI initiatives. This is achieved through a program that Arvind Krsna, IBM’s chairman president and CEO, calls a “flywheel of growth and margin expansion”.
Krishna stated in prepared remarks for IBM’s second quarter 2025 earnings, that the business had achieved $3.5bn annual run-rate saving by the end 2024. He added that he believed it could achieve $4.5bn annual run rate savings by 2025.
IBM reported a total revenue of $17bn, an 8% increase over the same quarter in the previous year. The annual recurring revenue for IBM’s software business increased by 10% to $22.7bn. OpenShift’s containerisation and virtualisation software saw revenue increase by more than 20 percent.
After completing the $6.4bn
IBM’s automation business grew by 14% after it acquired HashiCorp in the second quarter. Krishna said that IBM is seeing early signs of synergy with HashiCorp Terraform and Ansible which it acquired in 2019 as part of its acquisition of Red Hat.
IBM, like other major enterprise technology providers, has shifted the narrative from digitisation towards artificial intelligence (AI).
According to Krishna, “AI is a powerful catalyst for transformation for both our clients and IBM.” “Our generative AI business continues to grow and now exceeds $7.5bn. We are increasing our outlook for the full year’s free cash flow. We expect it to exceed $13.5bn.
Deutsche Telekom was a recent IBM customer. The telco chose IBM Concert, a tool powered by AI that allows intelligent automation of patch management and orchestration of security related activities.
Peter Leukert of Deutsche Telekom’s group CIO, Peter Leukert discussed the benefits of IBM AI tool. “Secure Operating Systems form the foundation for applications, databases, and services that we provide our customers. In the AI era, time is a crucial factor when it comes to patching. Security risks can be reduced by those who apply updates automatically and immediately. We face this challenge 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
Krishna, Motley Fool (19459070), discussed the small amount pricing pressure that comes with organisations considering any technology as a commodity rather than when it is perceived to be innovative. He said that the main focus is on reducing operational costs in order to increase software investment.
People are looking at third-party and internal labour costs. He said that they are looking to reduce these expenses to make room for the software. Krishna says that IBM’s AI-based product portfolio is more competitive and better than its competitors because of the AI.
Krishna said that IBM’s consulting division should focus on transformational projects and work with partners like SAP, Oracle and Palo Alto Networks. “Consulting will be a large part of the AI business book, which is on its way, because people are choosing to spend their dollars [consulting on AI] instead of other forms of consulting. It’s important to focus on what we call transformational projects, which includes AI.
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