IBM is a "direct beneficiary" of hyperscaler investment in AI infrastructure, according to CFO Jim Kavanaugh.

Speaking during IBM's Q3 2025 earnings call on October 22, Kavanaugh said that the company is not seeking "an opportunity in our cloud only," but that it's a "growth vector that we are able to ride and that helps increase overall growth rate in both software as well as in consulting."

He goes on to note that IBM partners "deeply" with all the hyperscalers, including Google, Amazon Web Services (AWS), Microsoft, and is "one of CoreWeave's large clients." The company, rather than expanding its own GPU fleet, enables customers to deploy IBM software on other infrastructures.

"As an example, if I take one of our very large health insurance clients, as they think through where they’re going to deploy their AI models, they do not like deploying in a public instance, but they’re perfectly fine getting a private instance in a cloud and deploying models there, deploying our software stacks there, and getting growth. We tend to do that," he explained.

Kavanaugh also noted the company's relationship with AI chip startup Groq. Earlier this week, the two firms partnered to offer agentic AI capabilities via GroqCloud on IBM WatsonX Orchestrate.

Speaking on the partnership, Kavanaugh said: "We also tend to, in some cases, for example, we are deploying Groq in people’s own data centers. That’s a big opportunity that’ll show up in revenue for us, both in consulting as well as in software, because on top of the Groq infrastructure, we tend to put our software stacks in some instances."

Overall, the quarter was a little lukewarm, with annual growth but failing to meet analyst expectations across the board.

Total revenue was $16.3 billion, up nine percent year over year (YoY), of which infrastructure contributed $3.6bn - up 17 percent YoY. The previous quarter brought in $17bn, with infrastructure providing $4.1bn.

Hybrid infrastructure grew 28 percent YoY for the quarter - significantly greater than the previous quarter's 19 percent.

The IBM Z mainframe program grew 61 percent YoY, a slower rate than the previous quarter, which saw a 67 percent growth.

The company launched its latest mainframe - IBM z17 - in June 2025. CEO Arvind Krishna said of its progress: "Albeit early, we’re 130 percent program to program on IBM z17 off of a z16, which was the most successful program in the history of IBM. Higher capacity opportunity creates higher monetization opportunity, creates higher price opportunity, creates higher value creation opportunity. I think when you look at it, we feel pretty good about delivering our model and software."

The largest segment remained software, with revenues of $7.2bn. Hybrid cloud - including Red Hat - increased 14 percent, below the expected 16 percent. Despite this, CFO Kavanaugh said that the company "feel[s] very good about the growth opportunities in Red Hat overall."

Consulting, meanwhile, saw revenues of $5.3bn, up three percent YoY.

Gross profit was $9.4bn, with a margin of 57.3 percent.

IBM ended the quarter with $14.9bn in cash, and a total debt of $63.1bn. The company is estimating it will have a free cash flow of $14bn for the full year.

Little information was given about IBM's quantum business, though the recent agreement with AMD to build quantum-centric supercomputing architectures, leveraging IBM’s quantum expertise and AMD’s CPUs, GPUs, and other accelerator technologies, was highlighted. Additionally, IBM deployed an IBM Quantum System Two this month at the IBM-Euskadi Quantum Computational Center in San Sebastián, in Spain’s Gipuzkoa region. This is the first in Europe, and second deployment outside the US.

Later this month, the company will be making its Spyre AI accelerator available - initially for the z17 and LinuxONE 5 systems.

During the third quarter, IBM experienced a cloud outage that affected 10 of its regions. The issue was addressed within two hours, but came after other outages earlier in the year.

Following the earnings call, IBM shares declined by around five percent. Year to date, they have risen around 31 percent.