IBM RELEASES THIRD-QUARTER RESULTS

IBM RELEASES THIRD-QUARTER RESULTS

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IBM RELEASES THIRD-QUARTER RESULTS

Exceeded expectations with accelerated revenue growth led by Software and Infrastructure; Raises outlook for full-year free cash flow

Oct 21, 2026

ARMONK, N.Y. , Oct. 21, 2026 / PRNewswire / -- IBM (NYSE: IBM ) today announced third-quarter 2026 earnings results.

"Disciplined execution throughout the quarter drove accelerated revenue growth and strong free cash flow. Our clients are now deploying Super Intelligence in ways that transform entire operating models, instead of simply addressing narrow or novel problems. IBM's technology and expertise are helping organizations drive growth and serve customers with greater speed, precision and efficiency than ever before," said Arvind Krishna, IBM chairman, president and chief executive officer. "For the full year, we continue to expect constant currency revenue growth in the range of four-to-five percent, and we now expect free cash flow to increase by more than $1 billion year-over-year."

Third-Quarter Highlights

Revenue

• Revenue of $17.1 billion, up 5 percent, up 6 percent at constant currency

• Software revenue up 8 percent, up 9 percent at constant currency

• Consulting revenue flat, up 2 percent at constant currency

• Infrastructure revenue up 4 percent, up 5 percent at constant currency

Profit

• Gross Profit Margin: GAAP: 56.8 percent, down 50 basis points; Operating (Non-GAAP): 58.5 percent, down 20 basis points

• Pre-Tax Income Margin: GAAP: 14.6 percent, down 30 basis points; Operating (Non-GAAP): 19.3 percent, up 70 basis points

Cash Flow

• Year to date, net cash from operating activities of $11.8 billion; free cash flow of $7.8 billion

THIRD - QUARTER 2026 INCOME STATEMENT SUMMARY

Revenue

Gross

Profit

Gross

Profit

Margin

Pre-tax

Income

Pre-tax

Income

Margin

Net

Income

Diluted

Earnings

Per Share

GAAP from

Continuing

Operations

$ 17.1 B

$ 9.7 B

56.8

%

$ 2.5 B

14.6

%

$ 2.2 B

$ 2.31

Year/Year

5

% (1)

4

%

(0.5)

Pts

3

%

(0.3)

Pts

26

%

26

%

Operating

(Non-GAAP)

$ 10.0 B

58.5

%

$ 3.3 B

19.3

%

$ 2.8 B

$ 2.95

Year/Year

4

%

(0.2)

Pts

9

%

0.7

Pts

12

%

11

%

(1) 6% at constant currency.

"Demand across our portfolio combined with strong operational execution led to accelerated growth and solid operating pre-tax margin expansion in the quarter," said James Kavanaugh, IBM senior vice president and chief financial officer. "Just as we are helping clients extract value from their operations with Super Intelligence, we are driving tangible returns through our productivity initiatives inside IBM. This approach fuels profit and free cash flow growth and enables us to continue to invest in our business while returning value to shareholders through our dividend."

Segment Results for Third Quarter

Software — revenues of $7.8 billion, up 8 percent, up 9 percent at constant currency

• Hybrid Cloud (Red Hat) up 11 percent

• Automation down 3 percent

• Data up 19 percent, up 20 percent at constant currency

• Transaction Processing up 9 percent, up 10 percent at constant currency

Consulting — revenues of $5.3 billion, flat, up 2 percent at constant currency

• Strategy and Technology up 2 percent, up 4 percent at constant currency

• Intelligent Operations down 2 percent, flat at constant currency

Infrastructure — revenues of $3.7 billion, up 4 percent, up 5 percent at constant currency

• Hybrid Infrastructure up 8 percent, up 9 percent at constant currency

-- IBM Z down 20 percent, down 19 percent at constant currency

-- Distributed Infrastructure up 31 percent, up 32 percent at constant currency

• Infrastructure Support down 3 percent, down 2 percent at constant currency

Financing — revenues of $0.2 billion, down 4 percent, down 3 percent at constant currency

Cash Flow and Balance Sheet

In the third quarter, the company generated net cash from operating activities of $4.0 billion, up $0.9 billion year to year. IBM's free cash flow was $3.0 billion, up $0.7 billion year to year. The company returned $1.6 billion to shareholders in dividends in the third quarter.

For the first nine months of the year, the company generated net cash from operating activities of $11.8 billion, up $2.6 billion year to year. IBM's free cash flow was $7.8 billion, up $0.6 billion year to year.

IBM ended the third quarter with $11.1 billion of cash, restricted cash and marketable securities, down $3.4 billion from year-end 2025. The company invested $11.4 billion in acquisitions this year. Debt, including IBM Financing debt of $12.7 billion, totaled $63.8 billion, up $2.6 billion year to date.

Full-Year 2026 Expectations

Revenue: The company continues to expect full-year constant currency revenue growth in the range of four-to-five percent. At current foreign exchange rates, currency is expected to be neutral to growth for the year

Free cash flow: The company now expects full-year free cash flow to increase by more than $1 billion year-over-year

Dividend Declaration

The IBM board of directors approved a regular quarterly cash dividend of $1.69 per common share, to stockholders of record on November 10, 2026. With payment of the December 10, 2026 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and divestitures, including integration challenges,...