Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Present Value of Free Cash Flow to Equity (FCFE)
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Profitability Ratios (Summary)
International Business Machines Corp., profitability ratios
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The profitability metrics demonstrate a generally positive trend over the five-year period, although with some fluctuations. Improvements are evident across all measured ratios, particularly from 2022 to 2025. Initial declines in 2022 were followed by consistent gains, suggesting successful strategic adjustments or favorable market conditions in subsequent years.
- Gross Profit Margin
- The gross profit margin exhibited a slight decrease from 54.90% in 2021 to 54.00% in 2022. However, it then steadily increased, reaching 58.19% in 2025. This indicates improving efficiency in production or sourcing, or a shift towards higher-margin products.
- Operating Profit Margin
- The operating profit margin showed a notable increase from 11.97% in 2021 to 13.50% in 2022. This positive momentum continued through 2023, reaching 15.17%. A slight dip to 14.95% occurred in 2024, but the margin rebounded strongly to 17.50% in 2025. This suggests effective management of operating expenses and improved operational leverage.
- Net Profit Margin
- The net profit margin experienced a significant decline from 10.01% in 2021 to 2.71% in 2022. However, a substantial recovery was observed in 2023, with the margin rising to 12.13%. It decreased slightly to 9.60% in 2024 before achieving a high of 15.69% in 2025. This indicates that factors beyond core operations, such as financing costs or taxes, significantly impacted profitability in 2022, but were subsequently mitigated.
- Return on Equity (ROE)
- Return on equity followed a similar pattern to the net profit margin, decreasing sharply from 30.38% in 2021 to 7.47% in 2022. A strong recovery occurred in 2023, reaching 33.29%, followed by a decrease to 22.06% in 2024, and a further increase to 32.45% in 2025. This suggests fluctuations in profitability relative to shareholder equity.
- Return on Assets (ROA)
- The return on assets also declined from 4.35% in 2021 to 1.29% in 2022, then increased to 5.55% in 2023. A slight decrease to 4.39% was observed in 2024, with a final increase to 6.97% in 2025. This indicates improving efficiency in utilizing assets to generate profits, mirroring the trends observed in other profitability ratios.
Overall, the period demonstrates a recovery and strengthening of profitability following a challenging year in 2022. The consistent upward trends in most ratios from 2023 to 2025 suggest a positive trajectory for the business.
Return on Sales
Return on Investment
Gross Profit Margin
International Business Machines Corp., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The gross profit margin exhibited an overall upward trend between 2021 and 2025. While fluctuations occurred during the period, the metric demonstrated consistent improvement, particularly in the later years. Gross profit increased steadily throughout the five-year period, while revenue growth was more moderate.
- Gross Profit Margin Trend
- The gross profit margin began at 54.90% in 2021. A slight decrease was observed in 2022, with the margin falling to 54.00%. However, the margin rebounded in 2023, reaching 55.45%, and continued to increase in subsequent years, reaching 56.65% in 2024 and culminating at 58.19% in 2025. This indicates improving efficiency in managing the cost of goods sold relative to revenue.
- Gross Profit Growth
- Gross profit increased from US$31,486 million in 2021 to US$39,297 million in 2025. The largest absolute increase occurred between 2024 and 2025, with a gain of US$3,746 million. Growth was consistent year-over-year, suggesting a sustained ability to generate profit from core operations.
- Revenue Growth
- Revenue also increased over the period, moving from US$57,350 million in 2021 to US$67,535 million in 2025. However, the rate of revenue growth was less pronounced than that of gross profit. The most significant revenue increase occurred between 2024 and 2025, with an increase of US$4,782 million. The slower revenue growth relative to gross profit contributed to the observed margin expansion.
The consistent growth in gross profit, coupled with a more moderate increase in revenue, suggests improved operational efficiency and pricing strategies. The increasing gross profit margin is a positive indicator of the company’s ability to control production costs and maintain profitability.
Operating Profit Margin
International Business Machines Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Operating Profit Margin, Sector | ||||||
| Software & Services | ||||||
| Operating Profit Margin, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Operating profit margin = 100 × Operating income ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The operating profit margin exhibited a generally positive trend over the five-year period. Initial values indicate improvement, followed by a slight contraction, and then a substantial increase towards the end of the analyzed timeframe.
- Operating Profit Margin Trend
- In 2021, the operating profit margin stood at 11.97%. This increased to 13.50% in 2022, representing a notable improvement in profitability. The margin continued to rise in 2023, reaching 15.17%, the highest value observed up to that point. A slight decrease was recorded in 2024, with the margin settling at 14.95%. However, 2025 saw a significant jump, with the operating profit margin reaching 17.50%, indicating a strong positive shift in operational efficiency and profitability.
The increase in operating profit margin is supported by growth in both operating income and revenue. While revenue experienced moderate growth throughout the period, the more substantial increase in operating income, particularly in 2025, appears to be the primary driver of the margin expansion. This suggests improved cost management or pricing strategies contributed to the observed profitability gains.
- Relationship to Revenue and Operating Income
- Revenue increased from US$57,350 million in 2021 to US$67,535 million in 2025. Operating income demonstrated a more pronounced increase, moving from US$6,865 million in 2021 to US$11,822 million in 2025. The consistent growth in both metrics, coupled with the accelerating operating income growth in the later years, contributed to the overall positive trend in the operating profit margin.
The observed fluctuations, particularly the slight dip in 2024, warrant further investigation to determine the underlying causes. However, the overall trajectory indicates strengthening operational performance and improved profitability over the analyzed period.
Net Profit Margin
International Business Machines Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to IBM | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| Net Profit Margin, Sector | ||||||
| Software & Services | ||||||
| Net Profit Margin, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Net profit margin = 100 × Net income attributable to IBM ÷ Revenue
= 100 × ÷ =
2 Click competitor name to see calculations.
The net profit margin exhibited significant fluctuation over the five-year period. Initial values demonstrate a substantial decline followed by a period of recovery and ultimately, strong growth.
- Net Profit Margin - Overall Trend
- The net profit margin began at 10.01% in 2021. A marked decrease was observed in 2022, falling to 2.71%. Subsequent years showed improvement, with the margin increasing to 12.13% in 2023 and 9.60% in 2024. The most significant increase occurred between 2024 and 2025, reaching 15.69%.
- Net Income and Revenue Relationship
- The volatility in net profit margin appears to be driven by changes in net income relative to revenue. While revenue demonstrated consistent, albeit moderate, growth throughout the period, net income experienced a considerable drop in 2022 before rebounding strongly in 2023 and continuing to increase through 2025. This suggests that factors impacting cost of goods sold, operating expenses, or other income statement items had a substantial effect on profitability.
- Year-over-Year Changes
- The largest year-over-year decrease in net profit margin occurred from 2021 to 2022, a decline of 7.30 percentage points. Conversely, the most substantial year-over-year increase was from 2024 to 2025, representing a 6.09 percentage point improvement. The period between 2022 and 2023 saw a significant recovery, with an increase of 9.42 percentage points.
The recent trend indicates a strengthening of profitability, as evidenced by the increasing net profit margin. However, the earlier volatility suggests potential sensitivity to underlying business conditions or strategic shifts.
Return on Equity (ROE)
International Business Machines Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to IBM | ||||||
| Total IBM stockholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| ROE, Sector | ||||||
| Software & Services | ||||||
| ROE, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
ROE = 100 × Net income attributable to IBM ÷ Total IBM stockholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Equity (ROE) exhibited considerable fluctuation over the five-year period. Initial values were strong, followed by a significant decline, and then a recovery culminating in a strong final year.
- Overall Trend
- The ROE demonstrated a volatile pattern. It began at 30.38% in 2021, experienced a substantial decrease to 7.47% in 2022, then rebounded to 33.29% in 2023. A moderate decline to 22.06% occurred in 2024 before a final increase to 32.45% in 2025.
- Net Income Impact
- Net income attributable to IBM showed a decrease from US$5,743 million in 2021 to US$1,639 million in 2022, which likely contributed to the sharp reduction in ROE observed during that period. Subsequent increases in net income to US$7,502 million, US$6,023 million, and finally US$10,593 million in 2023, 2024, and 2025 respectively, correlate with the observed increases and stabilization of ROE.
- Equity Influence
- Total IBM stockholders’ equity consistently increased throughout the period, moving from US$18,901 million in 2021 to US$32,648 million in 2025. While increasing equity generally provides a larger base for generating returns, the impact of this growth on ROE was often offset by changes in net income. The largest equity increase occurred between 2024 and 2025, yet ROE only increased moderately, suggesting net income was the dominant driver of the final year’s ROE.
The significant variance in ROE highlights the sensitivity of this metric to changes in both profitability and equity. The company experienced a period of reduced profitability in 2022, which substantially lowered ROE, but demonstrated a strong recovery in subsequent years, driven by improvements in net income.
Return on Assets (ROA)
International Business Machines Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to IBM | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
| ROA, Sector | ||||||
| Software & Services | ||||||
| ROA, Industry | ||||||
| Information Technology | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The Return on Assets (ROA) exhibited considerable fluctuation over the five-year period. Initial values demonstrated a decline followed by a substantial recovery and subsequent increase. A detailed examination of the ROA alongside its constituent components reveals key performance trends.
- Overall Trend
- The ROA began at 4.35% in 2021, decreased significantly to 1.29% in 2022, then increased to 5.55% in 2023. This upward momentum continued with a value of 4.39% in 2024, culminating in a peak of 6.97% in 2025. This indicates improving efficiency in utilizing assets to generate profit over the period.
- Year-over-Year Changes
- The most substantial year-over-year change occurred between 2021 and 2022, with a decrease of 3.06 percentage points in ROA. Conversely, the largest increase was observed between 2022 and 2023, representing a 4.26 percentage point improvement. The increase from 2024 to 2025 was 2.58 percentage points, demonstrating continued positive momentum, albeit at a slower rate than the prior year’s recovery.
- Relationship to Net Income and Total Assets
- The decline in ROA in 2022 coincided with a significant reduction in net income attributable to the company, while total assets also decreased, though to a lesser extent. The subsequent increases in ROA from 2023 onwards were driven by a combination of rising net income and increasing total assets, with net income growth outpacing asset growth in 2025, resulting in the highest ROA value of the period. The substantial increase in net income in 2025 contributed significantly to the improved ROA.
In summary, the ROA demonstrates a recovery from a low point in 2022, driven primarily by improvements in net income. The increasing ROA suggests enhanced profitability relative to the company’s asset base, particularly in the final year of the observed period.