The MoatNarrow moat

IBM (IBM) — moat facet

IBM's mainframe is a wide moat, its software a narrow one and its consulting a thin one, and together they earn only just above the cost of capital at a normal tax rate.

IBM's moat is uneven, and its returns show it. The widest part is the mainframe: clients who run core transaction systems on IBM Z rarely leave, and IBM says clients representing 85% of installed capacity are keeping or growing it1. The software around that incumbency, Transaction Processing, brought in $8,603 million in 20252.

Return on invested capital (%)20.0201510.520179.420193.720202.6202210.120238.4202412.92025Moat Explorer calculation from SEC EDGAR, pre-tax plus interest; 8% hurdle
Recovered, but far below 2015.

The second layer is the software portfolio: Red Hat, automation, data and security tools that customers renew. About 80% of software revenue is recurring3, and the Software segment earned a 33.1% margin in 20254. It is a narrow moat because much of it was bought, at prices that still have to be earned: goodwill was $67,717 million at the end of 20255.

The third layer, Consulting, is thin. It earned an 11.7% margin in open competition6.

Return on invested capital, computed from IBM's filings, was 12.9% in 20257. That figure needs a warning. IBM tags no operating income in its filings, so the calculation uses pre-tax income plus interest, and because IBM's effective tax rate was negative in 20258 the tax is set at zero. At a flat 21% tax rate the 2025 figure is about 10.2%9. The series was 20.0% in 2015 and fell to 2.6% in 202210, the year of a $5.9 billion pension charge11, before recovering.

The ROIC series also shows where the money went. Invested capital, measured as total assets less current liabilities and cash, was about $99.6 billion at the end of 202512, and more than half of IBM's total assets were goodwill and intangibles from acquisitions13. Amortisation of acquired intangibles, which the segment figures exclude, rose from $1,627 million in 2023 to $2,166 million in 202514, about 33%15. Every new purchase raises the capital the franchise has to earn a return on before it adds a dollar of profit.

Against an 8% hurdle that makes IBM a narrow moat that is only just earning its cost of capital on a normal tax rate. The falsifying number is ROIC at a 21% tax rate: 10.2% in 202516; if it falls back below 8%, the acquisitions are costing more than the franchise earns.

Moat trajectory: Holding steady

ROIC 12.9% (10.2% at 21% tax) in 2025, up from 2.6% in 2022.

The number that tests this moat
Moat Explorer calc
Return on invested capital against an 8% hurdle
12.9% (FY2025); 10.2% at a 21% tax rate

The whole moat in one number; below 8% on a normal tax rate the acquired software would be earning less than its cost.

How it's calculated: IBM tags no OperatingIncomeLoss, so operating profit is pre-tax income from continuing operations plus interest expense (2025: 10,328 + 1,935 = 12,263). Tax at the effective rate clamped to 0-35% (IBM's 2025 rate was negative, so zero). Invested capital = total assets less current liabilities less cash, averaged over the year (2025: 151,880 - 38,658 - 13,587 = 99,635; 2024: 137,175 - 33,142 - 13,947 = 90,086; average 94,861). 12,263 / 94,861 = 12.9%; x 0.79 = 10.2%. Years to 2020 include Kyndryl. The 8% hurdle is an assumed cost of capital.
Source: Moat Explorer ROIC calculation from EDGAR ↗
Aspects of the moat
DIG DEEPER 01
The Mainframe Franchise
The mainframe is IBM's widest moat: clients cannot easily leave it, so they buy in waves that IBM's revenue and share price must ride.
DIG DEEPER 02
Red Hat and the Hybrid Cloud
Red Hat made IBM neutral across every cloud, and its low-teens growth is steady enough to hold that position but not yet to repay the price.
DIG DEEPER 03
Buying Software, Building Recurring Revenue
IBM's software renews itself and earns an 83% gross margin, and IBM keeps buying more of it at prices that must still be earned back.
DIG DEEPER 04
Consulting: Distribution More Than Moat
IBM Consulting earns thin margins against open competition, and its value is that it carries IBM's software into client systems.
References
  1. ReportedThe widest part is the mainframe: clients who run core transaction systems on IBM Z rarely leave, and IBM says clients representing 85% of installed capacity are keeping or growing it.
    Arvind Krishna's letter to IBM investors with preliminary second-quarter 2026 results, Form 8-K exhibit 99.1. — Q2 2026 · publ. 14 July 2026 · source ↗
  2. ReportedThe software around that incumbency, Transaction Processing, brought in $8,603 million in 2025.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Software segment: Hybrid Cloud, Automation, Data, Transaction Processing and ARR. — FY2025 · publ. 24 February 2026 · source ↗
  3. ReportedAbout 80% of software revenue is recurring, and the Software segment earned a 33.1% margin in 2025.
    IBM Form 10-Q for the quarter ended 30 June 2026 - segment results, revenue categories, RPO, the Confluent acquisition and management discussion - Software segment results and revenue categories. — Q2 2026 · publ. 23 July 2026 · source ↗
  4. ReportedAbout 80% of software revenue is recurring, and the Software segment earned a 33.1% margin in 2025.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Software segment: Hybrid Cloud, Automation, Data, Transaction Processing and ARR. — FY2025 · publ. 24 February 2026 · source ↗
  5. ReportedIt is a narrow moat because much of it was bought, at prices that still have to be earned: goodwill was $67,717 million at the end of 2025.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - financial statements and notes: income statement, cash flow, borrowings, goodwill, acquisitions, pensions and market risk. — FY2025 · publ. 24 February 2026 · source ↗
  6. ReportedIt earned an 11.7% margin in open competition.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - segment note: segment revenue, segment profit, margins and reconciliation to reported revenue. — FY2025 · publ. 24 February 2026 · source ↗
  7. Moat Explorer calcReturn on invested capital, computed from IBM's filings, was 12.9% in 2025.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 51143: return on invested capital 20.0% (2015), 17.6% (2016), 10.5% (2017), 12.4% (2018), 9.4% (2019), 3.7% (2020), 6.0% (2021), 2.6% (2022), 10.1% (2023), 8.4% (2024), 12.9% (2025); at a flat 21% tax rate 6.7% (2024) and 10.2% (2025). — FY2015-FY2025 · publ. September 2026 · source ↗
    Method: IBM tags no OperatingIncomeLoss, so operating profit is pre-tax income from continuing operations plus interest expense (2025: 10,328 + 1,935 = 12,263). Tax at the effective rate clamped to 0-35% (IBM's 2025 rate was negative, so zero). Invested capital = total assets less current liabilities less cash, averaged over the year (2025: 151,880 - 38,658 - 13,587 = 99,635; 2024: 137,175 - 33,142 - 13,947 = 90,086; average 94,861). 12,263 / 94,861 = 12.9%; x 0.79 = 10.2%. Years to 2020 include Kyndryl. The 8% hurdle is an assumed cost of capital.
  8. ReportedIBM tags no operating income in its filings, so the calculation uses pre-tax income plus interest, and because IBM's effective tax rate was negative in 2025 the tax is set at zero.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - financial statements and notes: income statement, cash flow, borrowings, goodwill, acquisitions, pensions and market risk. — FY2025 · publ. 24 February 2026 · source ↗
  9. Moat Explorer calcAt a flat 21% tax rate the 2025 figure is about 10.2%.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 51143: return on invested capital 20.0% (2015), 17.6% (2016), 10.5% (2017), 12.4% (2018), 9.4% (2019), 3.7% (2020), 6.0% (2021), 2.6% (2022), 10.1% (2023), 8.4% (2024), 12.9% (2025); at a flat 21% tax rate 6.7% (2024) and 10.2% (2025). — FY2015-FY2025 · publ. September 2026 · source ↗
    Method: IBM tags no OperatingIncomeLoss, so operating profit is pre-tax income from continuing operations plus interest expense (2025: 10,328 + 1,935 = 12,263). Tax at the effective rate clamped to 0-35% (IBM's 2025 rate was negative, so zero). Invested capital = total assets less current liabilities less cash, averaged over the year (2025: 151,880 - 38,658 - 13,587 = 99,635; 2024: 137,175 - 33,142 - 13,947 = 90,086; average 94,861). 12,263 / 94,861 = 12.9%; x 0.79 = 10.2%. Years to 2020 include Kyndryl. The 8% hurdle is an assumed cost of capital.
  10. Moat Explorer calcThe series was 20.0% in 2015 and fell to 2.6% in 2022, the year of a $5.9 billion pension charge, before recovering.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 51143: return on invested capital 20.0% (2015), 17.6% (2016), 10.5% (2017), 12.4% (2018), 9.4% (2019), 3.7% (2020), 6.0% (2021), 2.6% (2022), 10.1% (2023), 8.4% (2024), 12.9% (2025); at a flat 21% tax rate 6.7% (2024) and 10.2% (2025). — FY2015-FY2025 · publ. September 2026 · source ↗
    Method: IBM tags no OperatingIncomeLoss, so operating profit is pre-tax income from continuing operations plus interest expense (2025: 10,328 + 1,935 = 12,263). Tax at the effective rate clamped to 0-35% (IBM's 2025 rate was negative, so zero). Invested capital = total assets less current liabilities less cash, averaged over the year (2025: 151,880 - 38,658 - 13,587 = 99,635; 2024: 137,175 - 33,142 - 13,947 = 90,086; average 94,861). 12,263 / 94,861 = 12.9%; x 0.79 = 10.2%. Years to 2020 include Kyndryl. The 8% hurdle is an assumed cost of capital.
  11. ReportedThe series was 20.0% in 2015 and fell to 2.6% in 2022, the year of a $5.9 billion pension charge, before recovering.
    IBM 2024 Annual Report (Form 10-K exhibit) - January 2024 segment changes, 2022-2024 segment profit, pension risk transfers and settlement charges. — FY2024 · publ. 25 February 2025 · source ↗
  12. Moat Explorer calcInvested capital, measured as total assets less current liabilities and cash, was about $99.6 billion at the end of 2025, and more than half of IBM's total assets were goodwill and intangibles from acquisitions.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 51143: return on invested capital 20.0% (2015), 17.6% (2016), 10.5% (2017), 12.4% (2018), 9.4% (2019), 3.7% (2020), 6.0% (2021), 2.6% (2022), 10.1% (2023), 8.4% (2024), 12.9% (2025); at a flat 21% tax rate 6.7% (2024) and 10.2% (2025). — FY2015-FY2025 · publ. September 2026 · source ↗
    Method: IBM tags no OperatingIncomeLoss, so operating profit is pre-tax income from continuing operations plus interest expense (2025: 10,328 + 1,935 = 12,263). Tax at the effective rate clamped to 0-35% (IBM's 2025 rate was negative, so zero). Invested capital = total assets less current liabilities less cash, averaged over the year (2025: 151,880 - 38,658 - 13,587 = 99,635; 2024: 137,175 - 33,142 - 13,947 = 90,086; average 94,861). 12,263 / 94,861 = 12.9%; x 0.79 = 10.2%. Years to 2020 include Kyndryl. The 8% hurdle is an assumed cost of capital.
  13. Moat Explorer calcInvested capital, measured as total assets less current liabilities and cash, was about $99.6 billion at the end of 2025, and more than half of IBM's total assets were goodwill and intangibles from acquisitions.
    Moat Explorer calculation from IBM's reported figures ($ millions unless stated). Segment mix 2025: Software 29,962 / 67,472 = 44.4% of segment revenue and 9,920 / 16,364 = 60.6% of segment profit; Consulting 21,055 / 67,472 = 31.2% and 2,464 / 16,364 = 15.1%; Infrastructure 15,718 / 67,472 = 23.3% and 3,458 / 16,364 = 21.1%; Financing 737 / 67,472 = 1.1% and 521 / 16,364 = 3.2%. Segment revenue below reported revenue: 60,530 - 59,621 = 909 (2022); 61,860 - 61,229 = 631 (2023); 62,753 - 62,510 = 243 (2024); 67,535 - 67,472 = 63 (2025). Growth: revenue 67,535 / 62,753 - 1 = 7.6% (2025); 62,753 / 61,860 - 1 = 1.4% (2024); Q2 2026 17,162 / 16,977 - 1 = 1.1%; Software 25,011 / 23,629 - 1 = 5.8%, 27,085 / 25,011 - 1 = 8.3%, 29,962 / 27,085 - 1 = 10.6%; Software Q2 2026 7,761 / 7,387 - 1 = 5.1%; Consulting 20,884 / 20,058 - 1 = 4.1%, 20,692 / 20,884 - 1 = -0.9%, 21,055 / 20,692 - 1 = 1.8%, 21,055 / 20,058 - 1 = 5.0% over three years, Q2 2026 5,327 / 5,314 - 1 = 0.2%; Infrastructure 14,593 / 15,288 - 1 = -4.5%, 14,020 / 14,593 - 1 = -3.9%, 15,718 / 14,020 - 1 = 12.1%, Q2 2026 3,835 / 4,142 - 1 = -7.4%; Financing 737 / 713 - 1 = 3.4%, Q2 2026 186 / 166 - 1 = 12.0%; Transaction Processing 8,603 / 7,714 - 1 = 11.5% and 8,603 - 7,714 = 889 added 2023-2025; Hybrid Cloud 7,327 - 5,827 = 1,500 added 2023-2025; 11% to 13% of 7,327 = 806 to 952 a year; OpenShift 30% x 2.0bn = 0.6bn a year; Infrastructure Support 5,100 / 6,021 - 1 = -15.3% (2021-2025) and 4,800 / 5,100 - 1 = -5.9%; research and development 8,316 / 7,479 - 1 = 11.2%; Software segment profit 9,920 / 7,012 - 1 = 41.5%; Consulting segment profit 2,464 / 1,871 - 1 = 31.7%; financing receivables 15,193 / 11,738 - 1 = 29.4%; total debt 62.0bn - 50.9bn = 11.1bn since 2022. Shares: mainframe-linked revenue 10,618 + 8,603 + 5,100 = 24,321, and 24,321 / 67,535 = 36.0%; Hybrid Cloud 7,327 / 29,962 = 24.5% of Software; OpenShift 2.0 / 24.6 = 8.1% of software ARR; June 2026 ARR 24.6bn / 2025 Software revenue 29.962bn = 82.1%; revenue outside the United States 40,643 / 67,535 = 60.2%, so about 60%; research and development 8,316 / 67,535 = 12.3% of revenue; quantum more than 10bn / 5 years = more than 2bn a year, and 2.0 / 8.316 = 24%, about a quarter; goodwill 67,717 / 151,880 = 44.6% of total assets; goodwill plus intangibles (67,717 + 11,391) / 151,880 = 52.1%; other assets 151,880 - 67,717 - 11,391 = 72,772; HashiCorp goodwill 4,684 / 7,433 = 63.0%; Confluent goodwill 7,238 / 11,602 = 62.4%, other net assets 11,602 - 7,238 = 4,364; stock-based compensation 1,685 / 16,364 = 10.3% of segment profit; Kyndryl spin 55,179 / 73,620 - 1 = -25.0% of 2020 revenue, about a quarter. Margins: Software Q2 2025 2,296 / 7,387 = 31.1%; Consulting Q2 2025 562 / 5,314 = 10.6%; Infrastructure Q2 2026 835 / 3,835 = 21.8% and Q2 2025 965 / 4,142 = 23.3%; total segment profit Q2 2026 4,092 / 17,110 = 23.9% and Q2 2025 4,003 / 17,009 = 23.5%; Financing Q2 2026 108 / 186 = 58% (reported 58.0%); pre-tax margin 10,328 / 67,535 = 15.3%; Global Technology Services 2020 117 / 27,039 = 0.4%; gross margin Q2 2026 9,907 / 17,162 = 57.7% and Q2 2025 9,977 / 16,977 = 58.8%. Red Hat: 7,327 / 35,100 = 20.9% of consideration; pre-tax at the Software margin 0.331 x 7,327 = 2,425, and 2,425 / 35,100 = 6.9%, about 7%; after a 21% tax 6.9% x 0.79 = 5.5%; revenue needed for 8% after tax 0.08 x 35,100 / (0.331 x 0.79) = 10,738, about 10.7bn, which is 10,738 / 7,327 = 1.47 times 2025 revenue: about 3.2 years at 12.5% growth, 4.4 years at 9% and 7.8 years at 5%. Cash and capital: acquisitions plus dividends 2025 8,294 + 6,255 = 14,549, and 14,549 / 14,734 = 98.7% of free cash flow; first half 2026 acquisitions 10.5bn / free cash flow 4.8bn = 2.2 times; dividends 6,255 / 10,593 = 59.0% of net income; Consulting backlog 31.9bn / 21.055bn = 1.5 years of revenue; remaining performance obligations 71bn - 68bn = 3bn lower in six months; pension risk transfers 16 + 6 + 1.2 = 23.2bn; defined-benefit obligations 14,460 + 29,872 = 44,332 against plan assets 18,073 + 26,733 = 44,806; free cash flow guidance 14.7bn + 1.0bn = 15.7bn. Further: revenue per employee 67,535 / 264.3 thousand = about 255,500 dollars; Q2 2026 Software share of segment profit 2,502 / 4,092 = 61.1%; first-half Software 14,813 / 13,722 - 1 = 8.0%; amortisation of acquired intangibles 2,166 / 1,627 - 1 = 33.1%; free cash flow 14.7 / 6.5 = 2.3 times (2021-2025); Q2 2026 Transaction Processing 2,208 - 2,030 = 178 lower, Data 1,782 - 1,499 = 283 higher, Hybrid Cloud 1,998 - 1,796 = 202 higher, Transaction Processing above Hybrid Cloud by 2,030 - 1,998 = 32; share price 225.51 / 332.46 - 1 = -32.2% from the 52-week high; first half 2026 Hybrid Cloud 3,903 / 3,483 - 1 = 12.1%, Transaction Processing 3,963 / 4,037 - 1 = -1.8%, Hybrid Infrastructure 4,678 / 4,512 - 1 = 3.7%, Infrastructure Support 2,483 / 2,515 - 1 = -1.3%, Automation 3,692 / 3,467 - 1 = 6.5%, Data 3,256 / 2,736 - 1 = 19.0%, Financing 406 / 357 - 1 = 13.7%, Strategy and Technology 5,829 / 5,702 - 1 = 2.2%, Intelligent Operations 4,770 / 4,680 - 1 = 1.9%; Strategy and Technology Q2 2026 2,933 / 2,920 - 1 = 0.4%; Infrastructure Support 2021 share 6,021 / 14,188 = 42.4%; Infrastructure 2020 pre-tax margin 1,654 / 14,533 = 11.4%; Consulting 2020 pre-tax margin 1,034 / 16,257 = 6.4%; buybacks 2015-2019 4,609 + 3,502 + 4,340 + 4,443 + 1,361 = 18,255; Hybrid Cloud 7,327 / 67,535 = 10.8% of revenue, about a tenth; acquisitions 2023 to June 2026 5.1 + 3.3 + 8.3 + 10.5 = 27.2bn; HashiCorp net of acquired cash and securities 7,433 - 929 - 331 = 6,173; ARR 24.6 - 21.3 = 3.3bn from end-2024 to June 2026; net interest excluding Financing 1,312 / 984 - 1 = 33.3%; 2024 signings 25,103 / 20,692 = 1.21, about 21% above revenue; generative AI book 12.5 - 9.5 = 3.0bn added in Q4 2025; EMEA growth gap 14.2 - 9.0 = 5.2 points; revenue 57,350 / 73,620 - 1 = -22.1% from 2020 as filed to 2021. Trailing twelve months to June 2026: revenue 67,535 - 31,519 + 33,079 = 69,095; net income 10,593 - 3,249 + 3,381 = 10,725; P/E 212,460 / 10,725 = 19.8; P/S 212,460 / 69,095 = 3.07 - cash flow, acquisitions, debt, pensions, backlog and the Red Hat return. — FY2015-Q2 2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in IBM's Annual Reports, Forms 10-Q, results releases and market data; operands shown in the source line.
  14. ReportedAmortisation of acquired intangibles, which the segment figures exclude, rose from $1,627 million in 2023 to $2,166 million in 2025, about 33%.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - segment note: segment revenue, segment profit, margins and reconciliation to reported revenue. — FY2025 · publ. 24 February 2026 · source ↗
  15. Moat Explorer calcAmortisation of acquired intangibles, which the segment figures exclude, rose from $1,627 million in 2023 to $2,166 million in 2025, about 33%.
    Moat Explorer calculation from IBM's reported figures ($ millions unless stated). Segment mix 2025: Software 29,962 / 67,472 = 44.4% of segment revenue and 9,920 / 16,364 = 60.6% of segment profit; Consulting 21,055 / 67,472 = 31.2% and 2,464 / 16,364 = 15.1%; Infrastructure 15,718 / 67,472 = 23.3% and 3,458 / 16,364 = 21.1%; Financing 737 / 67,472 = 1.1% and 521 / 16,364 = 3.2%. Segment revenue below reported revenue: 60,530 - 59,621 = 909 (2022); 61,860 - 61,229 = 631 (2023); 62,753 - 62,510 = 243 (2024); 67,535 - 67,472 = 63 (2025). Growth: revenue 67,535 / 62,753 - 1 = 7.6% (2025); 62,753 / 61,860 - 1 = 1.4% (2024); Q2 2026 17,162 / 16,977 - 1 = 1.1%; Software 25,011 / 23,629 - 1 = 5.8%, 27,085 / 25,011 - 1 = 8.3%, 29,962 / 27,085 - 1 = 10.6%; Software Q2 2026 7,761 / 7,387 - 1 = 5.1%; Consulting 20,884 / 20,058 - 1 = 4.1%, 20,692 / 20,884 - 1 = -0.9%, 21,055 / 20,692 - 1 = 1.8%, 21,055 / 20,058 - 1 = 5.0% over three years, Q2 2026 5,327 / 5,314 - 1 = 0.2%; Infrastructure 14,593 / 15,288 - 1 = -4.5%, 14,020 / 14,593 - 1 = -3.9%, 15,718 / 14,020 - 1 = 12.1%, Q2 2026 3,835 / 4,142 - 1 = -7.4%; Financing 737 / 713 - 1 = 3.4%, Q2 2026 186 / 166 - 1 = 12.0%; Transaction Processing 8,603 / 7,714 - 1 = 11.5% and 8,603 - 7,714 = 889 added 2023-2025; Hybrid Cloud 7,327 - 5,827 = 1,500 added 2023-2025; 11% to 13% of 7,327 = 806 to 952 a year; OpenShift 30% x 2.0bn = 0.6bn a year; Infrastructure Support 5,100 / 6,021 - 1 = -15.3% (2021-2025) and 4,800 / 5,100 - 1 = -5.9%; research and development 8,316 / 7,479 - 1 = 11.2%; Software segment profit 9,920 / 7,012 - 1 = 41.5%; Consulting segment profit 2,464 / 1,871 - 1 = 31.7%; financing receivables 15,193 / 11,738 - 1 = 29.4%; total debt 62.0bn - 50.9bn = 11.1bn since 2022. Shares: mainframe-linked revenue 10,618 + 8,603 + 5,100 = 24,321, and 24,321 / 67,535 = 36.0%; Hybrid Cloud 7,327 / 29,962 = 24.5% of Software; OpenShift 2.0 / 24.6 = 8.1% of software ARR; June 2026 ARR 24.6bn / 2025 Software revenue 29.962bn = 82.1%; revenue outside the United States 40,643 / 67,535 = 60.2%, so about 60%; research and development 8,316 / 67,535 = 12.3% of revenue; quantum more than 10bn / 5 years = more than 2bn a year, and 2.0 / 8.316 = 24%, about a quarter; goodwill 67,717 / 151,880 = 44.6% of total assets; goodwill plus intangibles (67,717 + 11,391) / 151,880 = 52.1%; other assets 151,880 - 67,717 - 11,391 = 72,772; HashiCorp goodwill 4,684 / 7,433 = 63.0%; Confluent goodwill 7,238 / 11,602 = 62.4%, other net assets 11,602 - 7,238 = 4,364; stock-based compensation 1,685 / 16,364 = 10.3% of segment profit; Kyndryl spin 55,179 / 73,620 - 1 = -25.0% of 2020 revenue, about a quarter. Margins: Software Q2 2025 2,296 / 7,387 = 31.1%; Consulting Q2 2025 562 / 5,314 = 10.6%; Infrastructure Q2 2026 835 / 3,835 = 21.8% and Q2 2025 965 / 4,142 = 23.3%; total segment profit Q2 2026 4,092 / 17,110 = 23.9% and Q2 2025 4,003 / 17,009 = 23.5%; Financing Q2 2026 108 / 186 = 58% (reported 58.0%); pre-tax margin 10,328 / 67,535 = 15.3%; Global Technology Services 2020 117 / 27,039 = 0.4%; gross margin Q2 2026 9,907 / 17,162 = 57.7% and Q2 2025 9,977 / 16,977 = 58.8%. Red Hat: 7,327 / 35,100 = 20.9% of consideration; pre-tax at the Software margin 0.331 x 7,327 = 2,425, and 2,425 / 35,100 = 6.9%, about 7%; after a 21% tax 6.9% x 0.79 = 5.5%; revenue needed for 8% after tax 0.08 x 35,100 / (0.331 x 0.79) = 10,738, about 10.7bn, which is 10,738 / 7,327 = 1.47 times 2025 revenue: about 3.2 years at 12.5% growth, 4.4 years at 9% and 7.8 years at 5%. Cash and capital: acquisitions plus dividends 2025 8,294 + 6,255 = 14,549, and 14,549 / 14,734 = 98.7% of free cash flow; first half 2026 acquisitions 10.5bn / free cash flow 4.8bn = 2.2 times; dividends 6,255 / 10,593 = 59.0% of net income; Consulting backlog 31.9bn / 21.055bn = 1.5 years of revenue; remaining performance obligations 71bn - 68bn = 3bn lower in six months; pension risk transfers 16 + 6 + 1.2 = 23.2bn; defined-benefit obligations 14,460 + 29,872 = 44,332 against plan assets 18,073 + 26,733 = 44,806; free cash flow guidance 14.7bn + 1.0bn = 15.7bn. Further: revenue per employee 67,535 / 264.3 thousand = about 255,500 dollars; Q2 2026 Software share of segment profit 2,502 / 4,092 = 61.1%; first-half Software 14,813 / 13,722 - 1 = 8.0%; amortisation of acquired intangibles 2,166 / 1,627 - 1 = 33.1%; free cash flow 14.7 / 6.5 = 2.3 times (2021-2025); Q2 2026 Transaction Processing 2,208 - 2,030 = 178 lower, Data 1,782 - 1,499 = 283 higher, Hybrid Cloud 1,998 - 1,796 = 202 higher, Transaction Processing above Hybrid Cloud by 2,030 - 1,998 = 32; share price 225.51 / 332.46 - 1 = -32.2% from the 52-week high; first half 2026 Hybrid Cloud 3,903 / 3,483 - 1 = 12.1%, Transaction Processing 3,963 / 4,037 - 1 = -1.8%, Hybrid Infrastructure 4,678 / 4,512 - 1 = 3.7%, Infrastructure Support 2,483 / 2,515 - 1 = -1.3%, Automation 3,692 / 3,467 - 1 = 6.5%, Data 3,256 / 2,736 - 1 = 19.0%, Financing 406 / 357 - 1 = 13.7%, Strategy and Technology 5,829 / 5,702 - 1 = 2.2%, Intelligent Operations 4,770 / 4,680 - 1 = 1.9%; Strategy and Technology Q2 2026 2,933 / 2,920 - 1 = 0.4%; Infrastructure Support 2021 share 6,021 / 14,188 = 42.4%; Infrastructure 2020 pre-tax margin 1,654 / 14,533 = 11.4%; Consulting 2020 pre-tax margin 1,034 / 16,257 = 6.4%; buybacks 2015-2019 4,609 + 3,502 + 4,340 + 4,443 + 1,361 = 18,255; Hybrid Cloud 7,327 / 67,535 = 10.8% of revenue, about a tenth; acquisitions 2023 to June 2026 5.1 + 3.3 + 8.3 + 10.5 = 27.2bn; HashiCorp net of acquired cash and securities 7,433 - 929 - 331 = 6,173; ARR 24.6 - 21.3 = 3.3bn from end-2024 to June 2026; net interest excluding Financing 1,312 / 984 - 1 = 33.3%; 2024 signings 25,103 / 20,692 = 1.21, about 21% above revenue; generative AI book 12.5 - 9.5 = 3.0bn added in Q4 2025; EMEA growth gap 14.2 - 9.0 = 5.2 points; revenue 57,350 / 73,620 - 1 = -22.1% from 2020 as filed to 2021. Trailing twelve months to June 2026: revenue 67,535 - 31,519 + 33,079 = 69,095; net income 10,593 - 3,249 + 3,381 = 10,725; P/E 212,460 / 10,725 = 19.8; P/S 212,460 / 69,095 = 3.07 - growth rates and line totals. — FY2015-Q2 2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in IBM's Annual Reports, Forms 10-Q, results releases and market data; operands shown in the source line.
  16. Moat Explorer calcThe falsifying number is ROIC at a 21% tax rate: 10.2% in 2025; if it falls back below 8%, the acquisitions are costing more than the franchise earns.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 51143: return on invested capital 20.0% (2015), 17.6% (2016), 10.5% (2017), 12.4% (2018), 9.4% (2019), 3.7% (2020), 6.0% (2021), 2.6% (2022), 10.1% (2023), 8.4% (2024), 12.9% (2025); at a flat 21% tax rate 6.7% (2024) and 10.2% (2025). — FY2015-FY2025 · publ. September 2026 · source ↗
    Method: IBM tags no OperatingIncomeLoss, so operating profit is pre-tax income from continuing operations plus interest expense (2025: 10,328 + 1,935 = 12,263). Tax at the effective rate clamped to 0-35% (IBM's 2025 rate was negative, so zero). Invested capital = total assets less current liabilities less cash, averaged over the year (2025: 151,880 - 38,658 - 13,587 = 99,635; 2024: 137,175 - 33,142 - 13,947 = 90,086; average 94,861). 12,263 / 94,861 = 12.9%; x 0.79 = 10.2%. Years to 2020 include Kyndryl. The 8% hurdle is an assumed cost of capital.
Sources
Generated September 28, 2026