IBM has credited the success of its consulting arm and increased sales of large computers to businesses for a market-beating rise in profits.
IBM enjoyed a strong fourth quarter
Reporting its results for the last three months of 2005, "Big Blue" saw its net income rise to $3.19bn (£1.8bn), 13% up from a year earlier.
The revenues of the world's biggest computer company rose 21% to $24.4bn compared to a year previously.
Its results came after IBM unveiled a new $1.1bn deal with clothing firm Gap.
The 10-year deal, also announced on Tuesday, will see IBM take over parts of Gap's computer network.
IBM has benefited from rising demand for business computer systems, not just in the US, but worldwide.
It was also awarded a record number of outsourcing contracts last year.
"IBM's business model is much more balanced and profitable than it was just a few years ago," said IBM chairman and chief executive Sam Palmisano.
"IBM is ready for 2006, as we continue to deliver on our agenda of driving innovation and transformation for our clients and their businesses."