IBM prefers to rent GPUs from cloudy rivals • The Register
If IBM reveals improved profit margins or a fresh round of redundancies, AI may be the reason, because Big Blue today revealed that its own “Project Bob” developer assistance tools have improved productivity among its coders by 45 percent.
Big Blue boss Arvind Krishna revealed that figure in prepared remarks [PDF] delivered as part of the venerable company’s Q3 2025 results, which included revenue of $16.33 billion and net income of $1.75 billion, representing nine percent year-over-year growth and a nice change from the $330 million loss posted for Q3 2024.
Krishna pointed to IBM winning $9.5 billion of work related to generative AI as a fine achievement, and a 59 percent year-over-year jump for mainframe revenue – a result that reflects the recent launch of the new Z17 machines. The debut of revised big iron helped IBM’s infrastructure revenue to grow 15 percent year-over-year. AI is also partly responsible for that growth, because as Krishna pointed out, storage is a key part of AI infrastructure and IBM is therefore selling plenty of it.
The CEO said IBM’s infrastructure business will benefit more from enthusiasm for AI than the company’s public cloud.
Asked if the Big Blue cloud can achieve the same kind of growth reported by other cloud operators who serve AI workloads, Krishna pointed out that IBM partners with hyperscalers.
“A thing that we haven’t talked about, but it’s certainly no secret, for example, we are one of CoreWeave’s large clients. We also tend to use a lot of infrastructure at AWS, at Azure as well as at GCP,” he said. “We [have] got a huge opportunity to do both consulting projects as well as deploy our software on those infrastructures for our clients,” he said.
Krishna pointed to “one of our very large health insurance clients” that prefers not to use public cloud, “but they [are] perfectly fine getting a private instance in a cloud and deploying models there, deploying our software stacks there and getting growth. So we tend to do that.”
“We also tend to, in some cases, for example, with Grok, we are deploying Grok in people’s own data centers. So that’s a big opportunity. That will show up in revenue for us, both in consulting as well as in software because on top of the Grok infrastructure, we tend to put our software stacks in some instances. So it’s less about us getting an opportunity in our cloud only, but much more that that’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.”
That rather suggests the Big Blue cloud won’t need to make bulk GPU buys, or match rival hyperscalers’ enormous capital expenditure on new and improved bit barns.
Krishna praised Red Hat for growing bookings by “about 20 percent” and improving revenue by 12 percent, but also noted that growth slowed a little at the software business unit – even though its AI-enabled products are in demand – before predicting future revenue will settle at “mid-teens or close to mid-teens growth.”
CFO James Kavanaugh weighed in by stating “Year-to-date, from a software perspective, we’re growing 8.5 percent overall, approaching nine percent right now. About two points of that growth is coming out from our GenAI book of business.”
AI is also helping IBM’s consulting business, which returned to growth in the quarter and is already working on 200 projects involving what Big Blue calls “Digital Workers” – IBM-speak for agentic AI.
The company predicted constant currency revenue growth of more than five percent for the full FY 2025. Investors didn’t like what they heard, as IBM shares sank from over $288 apiece to $269 in after-hours trading. ®
