Common-Size Income Statement

International Business Machines Corp., common-size consolidated income statement

12 months ended:	Dec 31, 2025	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Services	45.48%	47.51%	49.11%	49.90%	50.96%
Sales	53.43%	51.36%	49.70%	49.02%	47.68%
Financing	1.09%	1.13%	1.19%	1.08%	1.36%
Revenue	100.00%	100.00%	100.00%	100.00%	100.00%
Services	-31.06%	-32.72%	-34.03%	-34.80%	-33.39%
Sales	-10.16%	-10.04%	-9.90%	-10.53%	-10.78%
Financing	-0.60%	-0.59%	-0.62%	-0.67%	-0.93%
Cost	-41.81%	-43.35%	-44.55%	-46.00%	-45.10%
Gross profit	58.19%	56.65%	55.45%	54.00%	54.90%
Selling, general and administrative	-29.80%	-31.37%	-30.72%	-30.74%	-32.69%
Research and development	-12.31%	-11.92%	-10.95%	-10.85%	-11.31%
Intellectual property and custom development income	1.43%	1.59%	1.39%	1.10%	1.07%
Operating income	17.50%	14.95%	15.17%	13.50%	11.97%
Gains (losses) on foreign currency transactions	-1.47%	0.73%	-0.19%	1.06%	0.36%
Gains (losses) on derivative instruments	0.95%	-0.82%	0.03%	-0.37%	-0.36%
Interest income	0.96%	1.19%	1.08%	0.27%	0.09%
Net gains (losses) from securities and investment assets	-0.01%	0.03%	0.06%	-0.46%	0.23%
Retirement-related income (costs)	-0.10%	-5.51%	0.06%	-10.82%	-2.24%
Other	0.36%	1.42%	0.46%	0.77%	0.43%
Other income and (expense)	0.69%	-2.95%	1.51%	-9.55%	-1.49%
Interest expense	-2.87%	-2.73%	-2.60%	-2.01%	-2.01%
Income from continuing operations before income taxes	15.33%	9.26%	14.07%	1.94%	8.47%
(Provision for) benefit from income taxes	0.36%	0.35%	-1.90%	1.03%	-0.22%
Income from continuing operations	15.69%	9.61%	12.17%	2.98%	8.25%
Income (loss) from discontinued operations, net of tax	0.03%	0.01%	-0.02%	-0.24%	1.80%
Net income	15.72%	9.63%	12.15%	2.74%	10.05%
Net income attributable to noncontrolling interest	-0.04%	-0.03%	-0.03%	-0.03%	-0.03%
Net income attributable to IBM	15.69%	9.60%	12.13%	2.71%	10.01%

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 common-size income statement reveals a significant shift in the company’s revenue composition and profitability over the five-year period. Revenue contributions from Services decreased consistently, while those from Sales increased, indicating a strategic move towards a greater reliance on product sales. Cost of revenue as a percentage of revenue generally decreased, contributing to improved gross margins. Operating income demonstrated a positive trend, though with some volatility, and net income showed substantial improvement over the period.

Revenue Composition: The proportion of revenue derived from Services declined steadily from 50.96% in 2021 to 45.48% in 2025. Conversely, Sales increased from 47.68% to 53.43% over the same period. Financing remained a relatively small and stable component of revenue, fluctuating between 1.08% and 1.36%. This suggests a strategic shift in focus from service-based revenue to product sales.
Profitability Analysis: Gross profit as a percentage of revenue improved consistently, rising from 54.90% in 2021 to 58.19% in 2025. This improvement is partially attributable to the decreasing cost of revenue, which fell from 45.10% to 41.81% over the same timeframe. Operating income showed a generally positive trend, increasing from 11.97% to 17.50%, although there was a slight dip in 2024. Net income exhibited the most dramatic improvement, increasing from 10.05% in 2021 to 15.72% in 2025.
Operating Expenses: Selling, general and administrative expenses decreased as a percentage of revenue, moving from 32.69% in 2021 to 29.80% in 2025, indicating improved efficiency in these areas. Research and development expenses remained relatively stable, fluctuating between 10.85% and 12.31%. Intellectual property and custom development income showed a modest increase over the period.
Non-Operating Items: Gains (losses) on foreign currency transactions and derivative instruments were volatile, with fluctuations throughout the period. Interest income increased significantly from 0.09% to 1.19% before decreasing slightly to 0.96% in 2025. Interest expense remained relatively consistent, though it did increase slightly over the five years. Other income and (expense) experienced significant volatility, particularly in 2022, before stabilizing in later years. Retirement-related income (costs) showed considerable fluctuation, with a large expense in 2022 followed by income in 2023 and expenses in 2024 and 2025.
Tax Impact: The (provision for) benefit from income taxes varied considerably, ranging from a benefit of 1.90% in 2023 to an expense of 1.03% in 2022. This variability likely reflects changes in taxable income and applicable tax rates.
Discontinued Operations & Net Income: Income (loss) from discontinued operations was minimal, with a slight positive contribution in most years. Net income attributable to IBM followed the overall trend of increasing profitability, rising from 2.71% to 15.69%.

Overall, the company demonstrated a positive trajectory in profitability, driven by a shift in revenue composition, improved gross margins, and effective management of operating expenses. However, the volatility of certain non-operating items warrants further investigation.

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International Business Machines Corp. (NYSE:IBM)

Common-Size Income Statement