IBM plans to save $4.5 billion internally by scaling its AI initiative. This is achieved through what IBM Chairman, President and CEO Arvind Krishna calls the “flywheel for growth and widening margins.”
In a prepared statement in IBM's second quarter 2025 revenue call, Krishna said the business had achieved $3.5 billion annual savings by the end of 2024, and believes that by the end of 2025, it could achieve nearly $4.5 billion annual savings by the end of 2025.
Overall, IBM reported quarterly revenue of $17 billion, up 8% from the same period last year. Meanwhile, annual recurring revenue from the software business rose to $22.7 billion, an increase of 10% last year. That growth was led by an open shift in containerization and virtualization platforms, with revenues rising by over 20%.
IBM, which completed its $6.4 billion acquisition of Hasicorp in the second quarter, said its automation business had risen 14%. According to Krishna, IBM is currently seeing early signs of synergy between Hashcorp's Terraform products and Ansible, and has obtained it in 2019 as part of its acquisition of Red Hat.
https://www.youtube.com/watch?v=ntdk7k1bces
Like other major enterprise technology providers, IBM has moved its narrative from digitization to artificial intelligence (AI).
“AI remains a powerful driver of change for clients and for IBM,” Krishna said. “Our generative AI Book of Business continues to accelerate, and is now over $7.5 billion. Strong first half performance has increased our full year's outlook for free cash flow of over $13.5 billion.”
Deutsche Telekom is IBM's recent customer victory. Telco Selected IBM Concert is an AI-powered tool that enables intelligent automation in patch management and orchestration of security-related activities.
Peter Leukert, group CIO at Deutsche Telekom, discussing the benefits of IBM AI tools, said:
“AI continues to be a powerful transformational factor for clients and IBM. Our generative AI business book continues to accelerate, and is now over $7.5 billion.”
Arvind Krishna, IBM
Quarterly results show that IBM's businesses benefit from customers who want to deploy AI, but questions have been raised about whether it is a cannibalism for the business.
During the transcription of the company's revenue call posted to Motley Fool, Krishna discussed the slight pricing pressure, considering the organization's perceived as innovative technology. He said the main area of attention is how to reduce operational costs to increase software investment.
“People are looking at insider labour costs and third party labour costs. They are looking to reduce them to make room for software-centric,” he said.
According to Krishna, the AI built into the IBM product portfolio makes its products better and more competitive with rival products.
He said IBM's consulting business needs to focus on transformational projects and work with partners such as SAP, Oracle and Palo Alto Networks. “Consulting is a big part of the AI Book of Business because people are leading the dollar. [consulting on AI] In contrast to alternative forms of consulting. And that's why it's really important to focus on what's called transformational projects that include AI. ”
