Power Systems Grows Nicely In Q3, Looks To Grow For All 2025, Too

October 27, 2025 Timothy Prickett Morgan

Here’s a funny thing, or maybe not. In its conference call with Wall Street analysts going over the financial results for its third quarter ended in September, neither Arvind Krishna, IBM’s chairman and chief executive officer, nor James Kavanaugh, the company’s chief financial officer, said “Power” or “Power Systems” or “Power11” or anything directly relating to IBM i or AIX. Nary a peep, even though the Power11 upgrade cycle has begun in earnest and it looks like growth was pretty good in the third quarter and will be decent for all of 2025.

For a long time now, Big Blue has glommed together its Power Systems division, which includes sales of new and secondhand machinery as well as Power9 and Power10 capacity on the Power Virtual Server cloud, and its entire Storage division, which makes disk, flash, and tape storage arrays and libraries for the enterprise. The combined revenues are called “Distributed Infrastructure,” which is absolutely silly for machines that are primarily sold as standalone systems for running back office applications like ERP systems and their databases.

IBM gives growth rates for “IBM Z” mainframe platforms, which we still call System z because, well, Big Blue changes its product names too much and we don’t like product names that also have the vendor name in them. (We never liked “IBM i” either for the same reason.)

In the September quarter, IBM revealed that System z revenues were up 61 percent, which is pretty good and shows that the System z17 product cycle, based on the “Telum II” z17 processor, is doing well. In fact, Krishna said on the call that the z17 ramp was “the strongest two quarter launch in history,” and we are still trying to puzzle out precisely what that means given that the mainframe business used to be much, much larger in dollars unadjusted by inflation decades ago. Kavanaugh added that mainframe customers were so keen on spending on z17 iron that they didn’t spend quite so much on mainframe software, and said further that the System z line delivered its highest third quarter revenue in nearly two decades.

We have not seen financials for Power Systems as a division for many years, and it has been even longer since we have seen revenues of OS/400 and IBM i, AIX, and Linux machinery separately.

We get hints here and there from people inside of Big Blue about how the business is doing, and we have built a revenue model for Power Systems capacity sales over time based on that and the limited comments does sometime make. All that we know for sure is that according to Kavanaugh, distributed infrastructure revenues were up 10 percent and that it “reflects broad-based growth across our storage portfolio as clients scale capacity to meet rising data and AI demands.”

That doesn’t tell us much, as you can see. Which is why we have to build our own model of Power Systems sales:

In our model, when we pump the numbers in, we see IBM selling $259 million in Power-based systems and cloud capacity rentals in Q3 2025, an increase of 12.5 percent from the year ago period and outgrowing the Distributed Infrastructure category by two and a half points. Power-based storage array sales (like the DS8000 SAN arrays often sold with mainframes and big Power servers) added another $52 million in the quarter. Add it up, and you have $311 million in Power iron sold, up 12.1 percent year on year.

The first and third quarters tend to be weak for Power Systems and the second and fourth quarters tend to be stronger, with the fourth quarter being the biggest one. And our guess is that Q4 2025 will be one of the best quarter we have seen since Q4 2018. And that will set up the Power Systems business for year on year growth for all of 2025, as we show below:

If our guesses are right and IBM can bring in $658 million in Power Systems sales in Q4, with a big bump in Power iron sales to customers and Power iron sales to the Storage division for controllers in various storage products, then IBM can bring in $1.67 billion in overall Power iron sales for 2025, an increase of 4.6 percent over 2024’s $1.59 billion in sales. With the right kind of push and some AI augmentation with on-chip and outboard Spyre AI accelerators, revenues could grow even faster in 2026 and 2027 as the GenAI boom keeps going.

Back in Q3 2025, IBM’s hybrid infrastructure, which means all servers and all storage together in the latest Big Blue lingo, accounted for $2.2 billion in revenues, up 28 percent. Infrastructure support revenues were up 1 percent to $1.33 billion. The Infrastructure division posted sales of $3.56 billion, up 17 percent, with a gross profit of $2.04 billion (up 21.7 percent) and a pre-tax income of $644 million (up 52.6 percent).

All of this was admittedly against a very easy compare as Power10 and z16 system sales were waning this time last year.

As we always do, we try to get a sense of how the overall core systems business is doing at IBM, which means servers, storage, switching (there is very little of this, and what there is consists of reselling Cisco and Nvidia gear), operating systems, transaction processing software, base middleware embedded in the systems, tech support, and financing. This is IBM’s “real” systems business.

Here is what it looks like over time compared to overall revenues:

Our best guess is the core IBM systems business (not including Red Hat software and support) comprised just a tad under $7 billion in the quarter, and had a pre-tax income of $3.72 billion, which is 53.4 percent of revenues. This is a pretty big business and certainly a profitable one. Red Hat had $2.09 billion in sales in Q3 2025, and of this we reckon about $1.42 billion of that was for what would be added into the “real” systems bucket, but largely sold on non-IBM systems (like X86 servers from Dell, Hewlett Packard Enterprise, Lenovo, Cisco Systems, and others). This revenue probably would add another $220 million in pre-tax income. So call the real and purple systems business of the combined Big Blue and Red Hat drove $8.44 billion in sales and $3.94 billion in pre-tax income.

There are so many businesses in the world that are not as big or profitable as this “real” systems business at IBM, and Power Systems is an important part of that even if Big Blue never says so.

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