IBM Stock Falls After Hybrid Cloud Slowdown | Q3 2025 AI & Red Hat Update

IBM’s stock dropped after concerns over a slowdown in its high-profile hybrid cloud business, Red Hat. While AI and infrastructure segments are booming, the deceleration in Red Hat’s growth triggered a nearly 5% decline in after-hours trading. In Q3 2025, IBM reported total revenue of $16.33 billion, up 9% year-over-year, with adjusted EPS of $2.65, surpassing analyst expectations.

The AI segment surged to $9.5 billion, reflecting strong demand for AI-powered mainframes and enterprise solutions. Despite this, the hybrid cloud unit grew only 14%, down from 16% last quarter. CEO Arvind Krishna remains confident in returning Red Hat to mid-teen percentage growth by 2026. IBM also raised its full-year revenue growth forecast to over 5% in constant currency, with expected free cash flow of $14 billion, exceeding Wall Street estimates.

This video breaks down IBM’s Q3 earnings, highlights AI and hybrid cloud performance, and explains why investors are keeping a close eye on Red Hat. Stay tuned for a full analysis of IBM’s growth trajectory and what it means for the tech giant’s future in AI and enterprise solutions.

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Transcript

00:00IBM stock plunged after investors grew concerned over a slowdown in its high-profile hybrid cloud

00:06business. While AI is booming, the slowdown in Red Hat raises questions about the tech

00:12giant's growth strategy. IBM's Q3 2025 earnings report revealed a mixed performance, with total

00:20revenue hitting $16.33 billion, up 9% year-over-year, and adjusted EPS of $2.65, beating analyst

00:30expectations of $2.45. Its AI segment surged to $9.5 billion, reflecting strong demand for AI-powered

00:39mainframes and enterprise solutions. However, the Red Hat hybrid cloud unit grew only 14% this quarter,

00:47down from 16% previously, falling short of marked expectations and triggering a nearly 5% decline

00:54in after-hours trading. CEO Arvind Krishna remains confident in returning Red Hat to mid-team

01:01percentage growth by 2026. Looking ahead, IBM raised its full-year revenue growth forecast

01:08to over 5% in constant currency and expects free cash flow of $14 billion, surpassing Wall Street

01:15estimates. Despite Red Hat's slowdown, IBM's AI and infrastructure performance shows strong momentum

01:22for the future. In summary, IBM's Q3 results highlight its leadership in AI and infrastructure,

01:29but the Red Hat slowdown is a cautionary signal. Investors will watch closely to see if the hybrid

01:35cloud segment can regain its growth pace and sustain IBM's long-term trajectory.

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IBM Stock Falls After Hybrid Cloud Slowdown | Q3 2025 AI & Red Hat Update

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