“This puts us on track to deliver about $12 billion of free cash flow for the year, with the growth largely driven by adjusted EBITDA.”

In context

“lows for continued investments to drive innovation, which you can see in our higher R&D expense. The timing of discrete tax items this quarter resulted in an operating tax rate of about 6%. We are still expecting a full year operating tax rate consistent with last year. Overall, the combination of our revenue and operating margin performance resulted in 7% growth in our adjusted EBITDA. This contributed to our free cash flow performance. For the quarter, we generated $1.9 billion of free cash flow, up $600 million year-over-year. This growth reflects the performance of our underlying business, with adjusted EBITDA up $200 million year-over-year and about $400 million from timing of balance sheet dynamics and CapEx. Over the last 12 months, we generated free cash flow of $11.8 billion. This puts us on track to deliver about $12 billion of free cash flow for the year, with the growth largely driven by adjusted EBITDA. Since our acquisition of Red Hat, excluding 2021 when we spun off Kyndryl, our operating net income to free cash flow realization averaged 120%. Two factors drive this. One is stock-based compensation, which today represents 15 points of realization. And two, given the shift in our portfolio to a growing software business, deferred income also contributes to our realization. In terms of cash uses, we returned $1.5 billion to shareholders in the form of dividends. From a balance sheet perspective, we have a very strong liquidity position with cash of $19.3 billion, up from $13.5 billion at year-end 2023. Our debt balance at the end of the first quarter was $59.5 billion, including $9.9 billion from our financing business. Turning to the segments. Software revenue grew 6% with good pe”