Good afternoon, welcome to the 2026 IBM Annual Stockholders Meeting. I ask that the meeting please come to order. Thank you all for joining today. My name is Arvind Krishna, Chairman of the Board, and I will act as chairman of this meeting. Joining me on the webcast today from IBM are Jim Kavanaugh, Senior Vice President and Chief Financial Officer, Anne Robinson, Senior Vice President and Chief Legal Officer, Nickle LaMoreaux, Senior Vice President and Chief Human Resources Officer, and Jane Edwards, Vice President and Secretary. We are also joined by the members of IBM's board of directors. IBM has an exceptional board drawn from a variety of industries and businesses with operations around the world. They bring to our boardroom a rich assortment of backgrounds, talents, experiences, and perspectives to oversee the company's business and strategy.
I'd like to introduce each member of the board on the line today. In addition to myself, we are joined by Marianne Brown, former Chief Operating Officer, Global Financial Solutions at Fidelity National Information Services, Inc., Thomas Buberl, Chief Executive Officer of AXA, David Farr, retired Chairman and Chief Executive Officer of Emerson Electric Co., Alex Gorsky, former Chairman and Chief Executive Officer of Johnson & Johnson, Michelle Howard, retired Admiral, United States Navy, Ramon Laguarta, Chairman and Chief Executive Officer of PepsiCo, Andrew N. Liveris, retired Chairman and Chief Executive Officer of The Dow Chemical Company, William McNabb, retired Chairman and Chief Executive Officer of The Vanguard Group, Michael Miebach, Chief Executive Officer of Mastercard, Martha Pollack, President Emerita of Cornell University, Peter Voser, retired Chief Executive Officer of Shell plc and Chairman of ABB.
And Alfred Zollar, former Executive Advisor of Siris Capital, LLC . All stockholders of record on 27 February , 2026 were given notice of this meeting by mail. Copies were also sent to the financial press. Michael Barbera and Jason Graham of First Coast Results, have been appointed by the board of directors to serve as the inspectors of election for this meeting in accordance with our company's bylaws. The inspector of elections sent me a report which shows that over 79% of the outstanding stock entitled to vote at this meeting is represented by proxy. Under our bylaws, a quorum is a majority of the outstanding stock, and therefore, a quorum is represented. We will forego the reading of the minutes from last year's stockholders meeting and move directly to the items of business that are set forth in the proxy statement.
Moving to the items of business set forth in the proxy statement, there are four management proposals this year. Item one, the election of directors. Item two, ratification of the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm. Item three, advisory vote on executive compensation. Item four, approval of the 2026 long-term performance plan. Our board recommends a vote for all of these proposals, and our position is set forth in the proxy statement. Note that there are four stockholder proposals reflected as items five through eight in the proxy statement. Our board recommends a vote against these stockholder proposals. Other proposals will not be considered at today's meeting. There is no need to read the proposals or the supporting statements, as all of that information is set forth in the proxy statement.
Out of respect for the other stockholders, the rules of conduct published in advance of the meeting require that the speaker presenting the stockholder proposal limits their comments to a period of three minutes and limits their comments to the subject of the proposal. In addition, please note that this is not the time to ask questions, air personal grievances, or discuss matters that are otherwise not suitable for the conduct of the annual meeting. The first stockholder proposal is item five on page 86 of the proxy statement from Terone Marshall Hoyt, requesting a change to IBM's outside director stock ownership guidelines. Our statement in our position is on page 87. The proponent has submitted a recording in lieu of presenting in person. I'll now ask for this proposal to be presented by Mr. Hoyt.
I'm going to talk about my stockholder proposal on page 86 of the proxy statement. In the interest of time, I won't read it here. I'm going to refer to some other pages in the proxy, you may want to jot those pages, page numbers down. The proposal concerns outside directors who do not personally own any IBM stock. This means their own IBM shares bought on the stock market that are not part of their PSUs shares, which they only get when they leave the board. On page 30, you can see the stock holdings of all directors. Except for Mr. Laguarta, who is a new director, those who do not personally own stock have been directors for a minimum of two years. Two, Ms. Pollack and Mr. Voser, have been directors for more than five years.
In discussions with the people at IBM, the phrase "no skin in the game" came up. That sounds like a good description of these directors to me. On page 41, there is a good explanation of stock ownership requirements for executives. I thoroughly agree with those requirements and would like something very similar for the outside directors. In IBM's response rejecting this proposal, they used the phrase "inefficient use of corporate resources." I'm not sure what that phrase really means, and I can't see how a change in requirements for the outside directors is an inefficient use of corporate resources. IBM also says that outside directors owning their own shares means they could sell them. Yes, they could sell shares above the threshold mandated by the company, but so what? They still would own the threshold amount of shares.
To me, having all directors believing so strongly in the company that they want to own their own shares of stock seems perfectly logical. I hope you agree and vote for this proposal. Thank you.
Let's move on to the next proposal. The second stockholder proposal is item six on page 88 of the proxy statement from John Chevedden, requesting a right to act by written consent. Our statement of opposition is on page 89. I'll now ask the operator to open the line for Mr. Chevedden to present the proposal.
Hello, this is John Chevedden, Proposal six, shareholder right to act by written consent. Shareholders request that the board of directors take the necessary steps to permit written consent by the shareholders entitled to cast the minimum number of votes that would be necessary to authorize an action at a meeting at which all shareholders entitled to vote thereon were present and voting without any discrimination or restriction based on length of stock ownership. This proposal topic won 43% support at the 2024 IBM annual meeting without any special effort by the proponent. This 43% support likely represented more than 50% support from the IBM shareholders who have access to independent proxy voting advice. Proposal six does not ask shareholders to choose between a shareholder right to act by written consent and a shareholder right to call a special shareholder meeting.
Although IBM seems to present it as such, shareholders are best served when they have both rights. IBM's current shareholder right to call for a special shareholder meeting is so weak that this creates an additive incentive for IBM shareholders to have a right to act by written consent. Shame on IBM for suggesting that shareholders limit themselves to one shareholder right when IBM shareholders are entitled to two shareholder rights under state law. IBM does not understand the right to act by written consent. Written consent is a shareholder right that requires the formal backing of a IBM majority based on all shares outstanding. This majority support requirement in reality is much more than majority support because it's not economically possible to contact a significant percent of IBM shares to get their formal backing.
For an issue to still get majority support based on all shares outstanding, under written consent, it could need 70% support from the IBM shares that are economically possible to reach. The IBM shares that are economically possible to reach are the IBM shares that are most informed and have the greatest incentive to cast an informed ballot. Please vote yes. Shareholder right to act by written consent, proposal six.
Thank you, Mr. Chevedden. Operator, please mute the line, and we will move on to the next proposal. The third stockholder proposal is item seven on page 90 of the proxy statement from the National Center for Public Policy Research, requesting a report on AI bias. Our statement of opposition starts on page 91. The proponent has submitted a recording in lieu of presenting in person. I will now ask for this proposal to be presented by a representative from the National Center for Public Policy Research.
Good afternoon, fellow shareholders. My name is Steve Milloy. I am the executive director of the Free Enterprise Project of the National Center for Public Policy Research. I urge you to vote yes on proposal seven and for an AI bias audit. I'm an AI user, and it can be a great tool, but AI is subject to what 1950s IBM programmer George Fuechsel called GIGO, garbage in, garbage out. The internet is full of amazing information. It is also full of amazing garbage. AI models often cannot distinguish between the two. Example of garbage in, garbage out AI occurs in the controversial area of global warming and climate change. Here are three hardcore facts about climate. It cannot be scientifically demonstrated that greenhouse gas emissions have had any effect on global climate. Emissions-driven climate models do not work. No emissions-based apocalyptic climate prediction has ever come true.
Despite these realities, if you query IBM AI on climate, you will get back gloom and doom climate hoax dogma. This happens because the internet has been loaded for decades with bogus climate hoax claims and assumptions that are erroneous garbage. On IBM's website, IBM's Chief Sustainability Officer says, for example, that global warming is, quote, "leading to increased flooding, causing heat stroke and destroying farms and livelihoods. Insurance is becoming unaffordable." End quote. None of that is true, but it is what IBM AI is programmed with. Even IBM staff has been polluted with climate. It is precisely the sort of garbage that George Fuechsel warned about.
The mindless parroting of climate hoax garbage to governments, businesses, and the public has had devastating economic and societal impacts around the world, from wars to inflation to deadly energy failures to energy rationing to crop failures to de-industrialization to lost jobs to wasted taxpayer money to traumatized schoolchildren and beyond. It has been estimated that the world has wasted $10 trillion chasing the climate hoax narrative since 2015 alone. The list of harms from the climate hoax is endless. IBM AI has learned the hoax and spreads the climate garbage onto users. As I said, I use AI all the time. It can be a great tool, but I understand its limitations, but not everyone does. IBM's response to our proposals essentially, "Don't worry. Trust us. We're on it." I'm sorry, but we can't, and you're not.
While IBM may be great at the computing part of AI, the world actually functions on realities that are often lost in the Internet dumpster. Management needs to be much more humble about all this. It needs to take the bias problem seriously. Touchy-feely videos on the IBM website just don't cut it. Please vote yes on proposal seven. Thank you.
Let's move on to the last proposal. The fourth stockholder proposal is item eight on page 93 of the proxy statement from The Heritage Foundation requesting a report on discrimination and charitable support. Our statement of opposition starts on page 94. The proponent has submitted a recording in lieu of presenting in person. While the recording contains content largely unrelated to the proposal, we are playing it as submitted by the proponent. I'll now ask for this proposal to be presented by a representative from The Heritage Foundation.
My name is Stefan Padfield. I am a principal of the Free Enterprise Initiative as well as a senior legal fellow at The Heritage Foundation. The Heritage Foundation is the proponent of Proposal eight, which seeks a report on risks associated with IBM's charitable giving. One of the red flags signaling a need for this report is that IBM scored 100 on the Human Rights Campaign's Corporate Equality Index. While phrases like human rights and corporate equality sound great, scoring 100 on HRC's CEI can mean supporting the belief that a child can be born in the wrong body to the point of providing medical transition coverage for minors, despite the fact that the American Medical Association recently affirmed that such surgical interventions should be generally deferred.
The harms of this belief transcend ordinary business, and shareholders are not micromanaging corporations when they seek transparency regarding the risks. To further explain these risks, I am yielding the remainder of my time to detransitioner Camille Kiefel, who has firsthand experience with these treatments.
My name is Camille Kiefel, and I'm here to talk about what gender-affirming care, which IBM seems to cover for children in its employee healthcare plans, did to me. During adolescence, I experienced trauma around becoming a woman. My discomfort and confusion followed me into adulthood, where I struggled with multiple comorbidities and a declining mental state to the point that I can no longer function. When I turned to medical providers and asked about transitioning, the focus was not on understanding me but affirming me to surgery. How can someone make an informed decision if they are not given all the information? They can't. This is the standard way in which providers under IBM's current healthcare plans appear to treat their young patients. Years later, I filed a lawsuit against my providers. Since 2022, at least 25 detransitioners like me have filed lawsuits across the US.
Some of us have already won or reached a positive resolution. Many more are to follow. Yet there are still no meaningful safeguards in place. Policies that enable these interventions for minors carry legal, ethical, and human consequences. Responding to the legal and reputational risks now coming to the forefront of this conversation, Walmart updated its healthcare plan to ensure that its employee health benefits do not cover these harmful, medically unnecessary interventions for minors. Based on publicly available information from the Human Rights Campaign, IBM has not seemed to follow suit. Has IBM adequately evaluated the legal, ethical, and reputational exposure associated with this coverage? IBM, I ask that you reconsider policies regarding medical transition for children. This is not about politics. This is about ensuring that decisions with permanent consequences are made with full information, proper safeguards, and appropriate caution.
Thank you. At this time, the polls are now closed. I will now proceed with the report on your company and our progress in 2025. 2025 was the year AI moved from experimentation to execution. Business leaders stopped asking what AI could do and started asking what it would deliver. IBM answered by deploying enterprise AI that improves the economics of real work across thousands of clients worldwide. We applied those same capabilities inside our own company. As a result, I'm pleased to report that IBM is delivering strong results for clients, employees, and shareholders. Today, I want to speak with you about three things. First, our financial performance in 2025. Second, how we're executing our strategy around AI and hybrid cloud. Third, what we're building for the future, including quantum computing. Let's start with the numbers.
In 2025, IBM generated $67.5 billion in revenue, up 6% at constant currency. We delivered $14.7 billion in free cash flow, our highest in over a decade, and our generative AI book of business grew to over twelve and a half billion dollars since inception. Software led the way with 9% revenue growth at constant currency, our highest annual growth rate in history. three of our four software sub-segments delivered double-digit growth. Software now represents approximately 45% of IBM's total revenue. Consulting revenue was flat at constant currency. Demand remained consistent across AI-enabled workflow transformation and cloud modernization, and we are actively shifting the business towards higher-value AI-augmented delivery that improves margins over time. Infrastructure revenue grew 10% at constant currency, driven by the strength of mission-critical platforms like our new z17 mainframe.
We expanded operating pre-tax income margin by 100 basis points, driven by our continued shift to higher-value offerings and a sustained focus on productivity. Since the beginning of 2023, we have delivered approximately $4.5 billion in productivity savings. These results enabled us to invest significantly in the business while returning value to you, our shareholders. We returned $6.3 billion through dividends. I'm pleased to announce that we are increasing the quarterly dividend to $1.69 per share. We have now raised it for 30 consecutive years. We closed several acquisitions, including HashiCorp, and we invested over $8.3 billion in research and development to fuel continued innovation. Let me now turn to our strategy. IBM is a software-led company built on four core platforms: hybrid cloud, artificial intelligence, infrastructure with IBM Z, and an emerging one around quantum computing.
The power of the strategy lies in integration. IBM is uniquely positioned to help clients build, deploy, and manage enterprise AI on hybrid cloud and provide business solutions across software, consulting, and infrastructure. Today, more than 80% of our revenue comes from clients who transact across all three business segments. Revenue in one area pulls through revenue in others. Clients today aren't just adding AI, they're becoming AI first. They need enterprise-grade solutions they can control, govern, and scale, and that's what IBM delivers. At the center of our software portfolio is watsonx, our enterprise AI platform. In 2025, we expanded watsonx Orchestrate with pre-built domain agents for HR, sales, and procurement, and we introduced a catalog of more than 150 agents and tools in collaboration with our partners.
We released Granite 4.0, our next generation family of efficient open language models, which can reduce memory use by 70% compared to typical large language models while maintaining competitive performance. We also introduced IBM Bob, our new agentic development environment, which selects the best model for each task. IBM developers using Bob have already reported average productivity gains of 45%. Hybrid cloud remains essential because AI is only as valuable as the data behind it. We continue to see strong demand for Red Hat OpenShift and Ansible. In 2025, we launched Red Hat Enterprise Linux 10 with container-native capabilities. Our acquisition of HashiCorp added automation and FinOps capabilities valued by developers. In 2025, we announced an agreement to acquire Confluent, a leader in real-time data streaming, which we have recently closed.
On the infrastructure side, IBM z17 is our first mainframe fully engineered for AI, enabling hundreds of AI use cases and bringing intelligence directly into the flow of real-time operations like fraud detection and payments. We focus on industries where trust, security, data sovereignty, and complex workflows define success. That's a deliberate choice, it's one that sets IBM apart. Consulting plays a critical role in converting all of this technology into business outcomes. More than 150,000 IBM consultants worldwide are equipped with IBM Consulting Advantage, our AI-powered delivery platform that helps clients move from AI pilots to production at scale. We apply the same discipline internally. Our Client Zero approach means we deploy our own technology first, scale it for clients. AI-driven automation has already produced meaningful productivity gains across HR, finance, and IT.
No single company can deliver transformation alone. That's why we continue to expand our partner ecosystem. Working with AWS, Microsoft, SAP, Salesforce, Oracle, Palo Alto Networks, and others to extend our reach and serve clients better. Quantum is the first genuinely new computing paradigm in 80 years. It is not an iteration on what came before, but a fundamental departure, and it has crossed its critical threshold. It is no longer a science problem; it's an engineering problem. When something makes that transition, the question shifts from whether to when and how fast. We believe quantum technology today is comparable to where GPUs were in 2015: early, imperfect, but potentially transformative. IBM is building the hardware, software, and ecosystem to make quantum computing a practical reality. We have deployed more than 85 quantum systems for use by a global ecosystem of more than 300 organizations.
In 2025, we deployed our most advanced systems, IBM Quantum System Two, in Japan and Spain. We unveiled a path to build the world's first large-scale, fault-tolerant quantum computer, IBM Quantum Starling, at our quantum data center in Poughkeepsie, New York, by 2029. Early signals of commercial promise are emerging. HSBC has demonstrated improved algorithmic bond trading accuracy by 34% using IBM Quantum System. Moderna is using quantum optimization in drug design research, modeling the longest mRNA protein fold ever achieved. The potential applications ahead, from energy-efficient fertilizers to advanced batteries, can be significant. Let me close with this. The most successful businesses convert new technology into operating leverage. That was true of the internet. It was true of hybrid cloud, and it is true of AI. AI is redefining business economics, making possible what was previously too complex, too slow, or too costly.
Enterprises that integrate AI into real workflows at scale and with clear economic returns are the ones that will lead. This is what IBM is building, a business whose value grows as AI scales. For our clients, that means measurable outcomes. For our employees, that means greater productivity and the ability to deliver more value to our clients that they serve. For our shareholders, it means the company is structurally positioned to lead the next decade of enterprise technology. Thank you for your support, your confidence, and your partnership in this journey. The Inspector of Election sent me a report on the preliminary count of the votes cast based upon the proxies and ballots which have been processed. On the basis of that report, I declare that each of the 13 nominees listed in the proxy statement standing for election as directors received a majority of the votes cast.
A majority of the votes cast voted for the ratification of PricewaterhouseCoopers as the company's independent registered public accounting firm. A majority of the votes cast voted for the advisory vote on executive compensation. A majority of the votes cast voted for the 2026 long-term performance plan. The stockholder proposal requesting a change to IBM's outside director stock ownership guidelines did not receive a majority of the votes cast. The stockholder proposal requesting a right to act by written consent did not receive a majority of the votes cast. The stockholder proposal requesting a report on AI bias did not receive a majority of the votes cast. The stockholder proposal requesting a report on discrimination in charitable support did not receive a majority of the votes cast. We will now move on to the question period of the meeting.
As we have done for many years, we posted an invitation on the investor relations website in March, which gave stockholders the opportunity to submit questions in advance of today's meeting. For stockholders who signed in today with a control number, you can also submit questions through the portal during the meeting. I will now go through some of the questions that we received. There were a lot of questions from shareholders on artificial intelligence. Here's an update on IBM's strategy. First, AI is already a productivity engine inside IBM. As I stated on the company's report, we have used AI and automation to deliver four and a half billion dollars of productivity savings. Our disciplined execution of simplifying processes, applying data, automation, and AI at scale has driven these results. While there has been speculation that AI will eliminate software and services, we see the opposite.
Enterprise transformation still requires process change, integration, and people. We are embedding AI agents into all of our consulting engagements to augment our teams. This market, we believe, will expand. The greatest share of value on AI is going to come from enterprise deployment. This deployment won't happen through a single model or a single provider. Enterprises will use frontier models, smaller models, open source models, and on-premise models. They'll run AI across public cloud, private cloud, and their own infrastructure, and they are going to need to orchestrate across all of it. This is where IBM operates. Finally, on AI, sovereignty is becoming a bigger factor in where and how workloads run. Every enterprise and every nation is waking up to the fact that they need AI and cloud infrastructure that they control, and infrastructure that no one else can turn off or tamper with.
We see a large opportunity to help organizations run AI workloads under their own jurisdiction and controls. We also received a number of questions on quantum computing. While I did also talk about quantum computing in the report, let me just mention a few key milestone moments. First, I talked about quantum crossing a threshold. It is now an engineering problem, which becomes a question of time and milestones. I would like to claim credit that we have met every milestone since we published our quantum roadmap in 2020. We have deployed over 85 quantum systems since the first one we put online in 2016. 300 organizations use them through our IBM Quantum Network. We released the first blueprint for quantum-centric supercomputing. Researchers are already using this approach, as I mentioned, to simulate molecules and materials. Results have been published in peer-reviewed publications.
Our long-term roadmap is clear: IBM Quantum Starling, our first large-scale fault-tolerant system, is targeted for 2029. These machines will run hundreds of millions of quantum operations reliably. We are also working with partners to integrate classical accelerators and extend the quantum-centric architectures. We will explore algorithms with the Department of Energy National Laboratories, as well as universities. Our roadmap is designed to deliver provable enterprise value. A number of our stockholders showed interest in IBM's M&A strategy, including the recent completion of the Confluent acquisition. Let me provide some context on our approach to inorganic investment. IBM's approach to M&A is consistent and disciplined. Every transaction is evaluated against three core principles. One, the asset must be a strong strategic fit aligned with our hybrid cloud and AI strategy. It must also operate in structurally growing markets.
It must deliver clear synergies where IBM can add differentiated value through our technology, our relationships, and our go-to-market scale. It must meet our financial criteria with accretion to adjusted EBITDA within the first year and to free cash flow by the second year. Confluent is a strong example of this framework. Strategically, it strengthens our leadership in enterprise data and AI. This is critical as clients embed AI into their operations. As AI scales, access to high-quality trusted data becomes essential. Looking at synergy, Confluent integrates naturally with Red Hat, watsonx, our data portfolio, helping clients connect applications, AI agents, and data. Financially, it fits squarely within our disciplined capital allocation model. Confluent represented another deliberate step in advancing IBM as a software-led hybrid cloud and AI platform company focused on long-term value for our shareholders.
I would like to thank you for joining us today for our 2026 stockholders meeting and for your support of IBM. I now adjourn the meeting.