Summary
- IBM Q3 revenue was $17.1 billion, up 5%, with operating EPS of $2.95 versus consensus near $2.86 to $2.87.
- Software revenue grew 8% to $7.8 billion; consulting was flat at $5.3 billion.
- IBM now expects 2026 free cash flow to rise by more than $1 billion; revenue guidance is unchanged at 4% to 5% at constant currency.
- Shares rose roughly 4% to 6% in extended trading, depending on the time of the quote.
What IBM reported
IBM reported third-quarter 2026 revenue of $17.1 billion on Wednesday, up 5% from a year earlier and 6% at constant currency, and raised its full-year free cash flow outlook. The company released results after the market close and held its earnings call at 5 p.m. Eastern. [1]
Operating (non-GAAP) earnings were $2.95 per diluted share, up 11%. GAAP earnings from continuing operations were $2.31 per share, up 26%, on GAAP net income of $2.19 billion. Operating net income was $2.81 billion, up 12%, IBM said. [1]
Analysts had expected revenue of roughly $16.8 billion and adjusted earnings of about $2.86 to $2.87 per share, according to consensus figures cited by Benzinga and GuruFocus, so the company beat on both lines. [2] [3]
Segment results
Software revenue rose 8% to $7.8 billion (9% at constant currency), the largest and fastest-growing segment. Infrastructure revenue grew 4% to $3.7 billion (5% at constant currency). Consulting was flat at $5.3 billion, up 2% at constant currency. Financing revenue fell 4% to $192 million. [1]
Operating gross margin was 58.5%, down 0.2 points from a year earlier. GuruFocus noted that was below the 59.3% it cited as the expected figure, one soft spot in an otherwise above-consensus quarter. [1] [3]
Cash flow and outlook
Operating cash flow in the quarter was $4.0 billion and free cash flow was $3.0 billion, up $0.7 billion. For the first nine months, free cash flow was $7.8 billion. IBM said it paid $1.6 billion in dividends during the quarter. [1]
The company now expects 2026 free cash flow to rise by more than $1 billion from last year, up from its earlier guidance of about $1 billion, according to Benzinga's comparison with prior guidance. Its revenue outlook is unchanged at 4% to 5% growth at constant currency, and currency is expected to be neutral to growth at current exchange rates. [1] [2]
CEO Arvind Krishna credited "disciplined execution" for what he described as accelerated revenue growth and strong free cash flow. [1]
Share price reaction
IBM shares rose in extended trading after the report. Outlets captured different moments: GuruFocus reported a gain of about 4.5% in early post-market trading, while Benzinga showed the stock up about 6% near $267 at the time of its publication. The figures differ because after-hours prices move quickly, and the regular-session close and the final extended-hours level were not confirmed in the sources reviewed. [2] [3]
Search interest in the stock began around 19:30 UTC, shortly before the report was released, and the earnings release is the obvious news that followed. The sources reviewed do not say what drove the initial rise in searches. [1] [2]
Balance sheet, dividend and what comes next
As of Sept. 30, IBM held $11.1 billion in cash, restricted cash and marketable securities, down $3.4 billion from the end of 2025. Total debt was $63.8 billion, up $2.6 billion this year, including $12.7 billion of IBM Financing debt. The company said it has invested $11.4 billion in acquisitions so far in 2026. [1]
The board declared a quarterly dividend of $1.69 per share, payable Dec. 10 to shareholders of record on Nov. 10. Investors will next look to the fourth-quarter report for whether software growth holds near 8% and whether consulting, which was flat, returns to growth. [1] [3]
Reporting sources
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