IBM RELEASES SECOND-QUARTER RESULTS
Rhea-AI Summary
IBM (NYSE: IBM) reported second-quarter 2026 revenue of $17.2 billion, up 1% year over year, with GAAP net income from continuing operations of $2.2 billion and diluted EPS of $2.27. Gross margin was 57.7%, down 1.0 point, and pre-tax income margin was 14.4%.
Software revenue rose 5% to $7.8 billion, driven by Hybrid Cloud (Red Hat) +11% and Data +19%. Consulting was flat at $5.3 billion, while Infrastructure declined 7% to $3.8 billion, including a 42% drop in IBM Z and a 37% increase in Distributed Infrastructure. Financing revenue grew 12%.
IBM generated Q2 operating cash flow of $2.6 billion (up $0.9 billion) and free cash flow of $2.5 billion (down $0.3 billion). For the first half, free cash flow was $4.8 billion, flat year over year. IBM invested $10.5 billion in acquisitions year to date and ended the quarter with $8.2 billion in cash, restricted cash and marketable securities and total debt of $62.0 billion.
According to IBM, full-year 2026 constant-currency revenue growth is now expected at 4–5%, with currency neutral to growth, and free cash flow is expected to increase by about $1 billion year over year. The board declared a quarterly dividend of $1.69 per share, payable September 10, 2026, to shareholders of record on August 10, 2026.
Positive
- Total revenue $17.2B, up 1% year over year in Q2 2026
- Software segment revenue $7.8B, up 5% year over year
- Data subsegment revenue up 19% year over year
- Hybrid Cloud (Red Hat) revenue up 11% year over year
- Distributed Infrastructure revenue up 37% year over year
- Financing revenue $0.2B, up 12% year over year
- Operating (non-GAAP) pre-tax income $3.3B, up 3% year over year
- Operating (non-GAAP) diluted EPS $2.93, up 5% year over year
- Q2 operating cash flow $2.6B, up $0.9B year over year
- First-half 2026 operating cash flow $7.8B, up $1.7B year over year
- Full-year 2026 constant-currency revenue growth guided to 4–5%
- Full-year 2026 free cash flow expected to rise about $1B year over year
- Order backlog in Distributed Infrastructure nearly $500M
- Acquisitions year to date $10.5B invested
- Quarterly dividend $1.69 per share approved
Negative
- GAAP net income from continuing operations down 1% year over year
- GAAP diluted EPS $2.27, down 2% year over year
- Gross margin 57.7%, down 1.0 percentage point year over year
- GAAP pre-tax income $2.5B, down 5% year over year
- GAAP pre-tax margin 14.4%, down 0.9 percentage point year over year
- Infrastructure segment revenue $3.8B, down 7% year over year
- IBM Z revenue down 42% year over year
- Transaction Processing software revenue down 8% year over year
- Q2 free cash flow $2.5B, down $0.3B year over year
- Cash, restricted cash and marketable securities $8.2B, down $6.3B from year-end 2025
- Total debt $62.0B, up $0.7B year to date
- Revenue headwinds reported late in the quarter
News Market Reaction – IBM
On the day this news was published, IBM gained 0.43%, reflecting a mild positive market reaction. Argus tracked a peak move of +6.3% during that session. Our momentum scanner triggered 2 alerts that day, indicating moderate trading interest and price volatility. This price movement added approximately $857M to the company's valuation, bringing the market cap to $200.20B at that time.
Data tracked by StockTitan Argus on the day of publication.
Key Figures
Historical Context
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| Jul 15 | Power Systems launch | Positive | -2.7% | New Power systems and AI-enabled software targeted enterprise productivity and infrastructure management. |
| Jul 14 | Preliminary earnings results | Negative | -24.5% | Preliminary results cited infrastructure weakness, delayed deals, and lower GAAP earnings per share. |
| Jul 09 | AI software update | Positive | -2.2% | IBM expanded its agentic development platform with multi-agent capabilities and modernization workflows. |
| Jul 08 | Earnings date notice | Neutral | -1.3% | IBM scheduled its second-quarter financial results conference call for July 22. |
| Jul 08 | Lightwell launch | Positive | -1.3% | IBM and Red Hat launched open-source security remediation offerings for enterprise customers. |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
IBM's recent strategic and product announcements were generally followed by negative price reactions, while the preliminary second-quarter results produced the largest decline.
Key Terms
constant currency financial
free cash flow financial
gaap financial
adjusted ebitda financial
fault-tolerant quantum computer technical
AI-generated analysis. How Rhea-AI works. Not financial advice.
Company provides updated full-year expectations
"We are confident in IBM's strategy and portfolio, and in our ability to capture growth opportunities ahead. We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio - across software, infrastructure, and consulting - is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future," said Arvind Krishna, IBM chairman, president and chief executive officer. "In addition, we are taking action to accelerate our revenue growth and profitability, driving productivity across the company with AI and automation, and heavily investing in commercializing innovation at speed and scale. We now expect constant currency revenue growth in the range of four-to-five percent, and we continue to expect free cash flow to increase by about
Full-Year 2026 Expectations
- Revenue: The company now expects 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 continues to expect full-year free cash flow to increase by about
$1 billion
Operational Focus Areas
- High-Growth Portfolio: Areas of IBM's software business that help clients manage, deploy and build AI-ready solutions, like Red Hat, the watsonx portfolio, HashiCorp, and Confluent continue to deliver strong performance. Within Distributed Infrastructure, Power and Storage grew at a record pace in the second quarter, now having built up an order backlog of nearly
$500 million
- Rapid Innovation at Scale: IBM is acting decisively to capture new opportunities as they arise. Lightwell, a new capability to address open source security vulnerabilities, leverages IBM and Red Hat's trust within the open source community, unique approach to AI, and global scale. In the first two weeks of availability, Lightwell has already made more than 7,500 open source patches available to help clients secure vulnerabilities. Additionally, quantum computing continues to be an investment priority for the company. In May, with the
U.S . Department of Commerce, IBM announced a letter of intent to build Anderon, the world's first pure-play quantum wafer foundry. IBM will invest more than$10 billion
- Productivity Enables Investment and Value: IBM is accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain. These efforts help enhance margin and free cash flow, and strengthen the company's ability to capture significant growth opportunities. The company now expects improved pre-tax income margin expansion for the full year.
"Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow," said James Kavanaugh, IBM senior vice president and chief financial officer. "In a quarter like this, it is critical that our financial and operational discipline remains strong and that we continue to invest for growth while returning value to shareholders through our dividend."
SECOND-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 | $ 17.2 B | $ 9.9 B | 57.7 | % | $ 2.5 B | 14.4 | % | $ 2.2 B | $ 2.27 | |||||||||||
Year/Year | 1 | % | (1) | % | (1.0) | Pts | (5) | % | (0.9) | Pts | (1) | % | (2) | % | ||||||
Operating (Non-GAAP) | $ 10.2 B | 59.4 | % | $ 3.3 B | 19.2 | % | $ 2.8 B | $ 2.93 | ||||||||||||
Year/Year | 0 | % | (0.7) | Pts | 3 | % | 0.3 | Pts | 5 | % | 5 | % | ||||||||
Segment Results for Second Quarter
- Software — revenues of
$7.8 billion
- Hybrid Cloud (Red Hat) up 11 percent
- Automation up 4 percent, up 3 percent at constant currency
- Data up 19 percent, up 18 percent at constant currency
- Transaction Processing down 8 percent, down 9 percent at constant currency - Consulting — revenues of
$5.3 billion
- Strategy and Technology flat, up 1 percent at constant currency
- Intelligent Operations flat, up 1 percent at constant currency - Infrastructure — revenues of
$3.8 billion
- Hybrid Infrastructure down 10 percent
-- IBM Z down 42 percent
-- Distributed Infrastructure up 37 percent
- Infrastructure Support down 1 percent - Financing — revenues of
$0.2 billion
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of
For the first six months of the year, the company generated net cash from operating activities of
IBM ended the second quarter with
Dividend Declaration
The IBM board of directors approved a regular quarterly cash dividend of
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, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI, including the company's increased AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.
Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:
- adjusting for currency (i.e., at constant currency);
- presenting operating (non-GAAP) earnings per share amounts and related income statement items;
- free cash flow;
- net cash from operating activities excluding IBM Financing receivables;
- adjusted EBITDA;
- adjusted EBITDA margin.
The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q26. Presentation charts will be available shortly before the Webcast.
Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).
Contact: IBM
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
Erin McElwee, 347-920-6825
erin.mcelwee@ibm.com
INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited; $ in millions except per share amounts) | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
2026 | 2025 | 2026 | 2025 | ||||||||
REVENUE BY SEGMENT | |||||||||||
Software | $ 7,761 | $ 7,387 | $ 14,813 | $ 13,722 | |||||||
Consulting | 5,327 | 5,314 | 10,599 | 10,382 | |||||||
Infrastructure | 3,835 | 4,142 | 7,161 | 7,027 | |||||||
Financing | 186 | 166 | 406 | 357 | |||||||
Other | 52 | (31) | 100 | 30 | |||||||
TOTAL REVENUE | 17,162 | 16,977 | 33,079 | 31,519 | |||||||
GROSS PROFIT | 9,907 | 9,977 | 18,857 | 18,008 | |||||||
GROSS PROFIT MARGIN | |||||||||||
Software | 82.6 | % | 83.9 | % | 82.7 | % | 83.7 | % | |||
Consulting | 28.9 | % | 27.5 | % | 28.2 | % | 27.4 | % | |||
Infrastructure | 58.4 | % | 61.5 | % | 57.7 | % | 57.9 | % | |||
Financing | 42.5 | % | 45.7 | % | 43.0 | % | 45.8 | % | |||
TOTAL GROSS PROFIT MARGIN | 57.7 | % | 58.8 | % | 57.0 | % | 57.1 | % | |||
EXPENSE AND OTHER INCOME | |||||||||||
SG&A | 4,981 | 5,027 | 10,071 | 9,913 | |||||||
R&D | 2,311 | 2,097 | 4,485 | 4,047 | |||||||
Intellectual property and custom development income | (166) | (215) | (338) | (468) | |||||||
Other (income) and expense | (185) | (39) | (186) | (204) | |||||||
Interest expense | 486 | 510 | 959 | 965 | |||||||
TOTAL EXPENSE AND OTHER INCOME | 7,428 | 7,380 | 14,991 | 14,253 | |||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 2,479 | 2,597 | 3,866 | 3,755 | |||||||
Pre-tax income margin | 14.4 | % | 15.3 | % | 11.7 | % | 11.9 | % | |||
Provision for/(benefit from) income taxes | 313 | 404 | 484 | 507 | |||||||
Effective tax rate | 12.6 | % | 15.5 | % | 12.5 | % | 13.5 | % | |||
INCOME FROM CONTINUING OPERATIONS | $ 2,166 | $ 2,193 | $ 3,382 | $ 3,248 | |||||||
DISCONTINUED OPERATIONS | |||||||||||
Income/(loss) from discontinued operations, net of taxes | (1) | 1 | (1) | 1 | |||||||
NET INCOME | $ 2,165 | $ 2,194 | $ 3,381 | $ 3,249 | |||||||
EARNINGS PER SHARE OF COMMON STOCK | |||||||||||
Assuming dilution | |||||||||||
Continuing operations | $ 2.27 | $ 2.31 | $ 3.55 | $ 3.43 | |||||||
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | |||||||
TOTAL | $ 2.27 | $ 2.31 | $ 3.55 | $ 3.43 | |||||||
Basic | |||||||||||
Continuing operations | $ 2.30 | $ 2.36 | $ 3.60 | $ 3.49 | |||||||
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | |||||||
TOTAL | $ 2.30 | $ 2.36 | $ 3.60 | $ 3.50 | |||||||
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's) | |||||||||||
Assuming dilution | 953.3 | 948.0 | 952.7 | 946.7 | |||||||
Basic | 941.2 | 930.8 | 939.9 | 929.4 | |||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) | ||||
($ in millions) | At June 30, | At December 31, | ||
ASSETS: | ||||
Current assets: | ||||
Cash and cash equivalents | $ 7,172 | $ 13,587 | ||
Restricted cash | 45 | 54 | ||
Marketable securities | 960 | 830 | ||
Notes and accounts receivable - trade, net | 6,044 | 8,112 | ||
Short-term financing receivables | ||||
Held for investment, net | 5,782 | 7,344 | ||
Held for sale | 874 | 1,131 | ||
Other accounts receivable, net | 1,348 | 1,052 | ||
Inventories | 1,746 | 1,220 | ||
Deferred costs | 1,238 | 1,084 | ||
Prepaid expenses and other current assets | 3,188 | 2,530 | ||
Total current assets | 28,398 | 36,944 | ||
Property, plant and equipment, net | 5,736 | 5,899 | ||
Operating right-of-use assets, net | 3,068 | 3,129 | ||
Long-term financing receivables, net | 7,126 | 7,708 | ||
Prepaid pension assets | 7,645 | 7,544 | ||
Deferred costs | 835 | 825 | ||
Deferred taxes | 8,709 | 8,610 | ||
Goodwill | 74,599 | 67,717 | ||
Intangibles, net | 13,955 | 11,391 | ||
Investments and sundry assets | 2,028 | 2,112 | ||
Total assets | $ 152,099 | $ 151,880 | ||
LIABILITIES: | ||||
Current Liabilities: | ||||
Taxes | $ 2,023 | $ 2,347 | ||
Short-term debt | 5,775 | 6,424 | ||
Accounts payable | 4,395 | 4,756 | ||
Compensation and benefits | 3,364 | 4,114 | ||
Deferred income | 16,160 | 16,101 | ||
Operating lease liabilities | 770 | 800 | ||
Other liabilities | 3,425 | 4,116 | ||
Total current liabilities | 35,912 | 38,658 | ||
Long-term debt | 56,212 | 54,836 | ||
Retirement-related obligations | 8,603 | 9,018 | ||
Deferred income | 4,272 | 4,271 | ||
Operating lease liabilities | 2,515 | 2,547 | ||
Other liabilities | 10,044 | 9,810 | ||
Total liabilities | 117,558 | 119,139 | ||
EQUITY: | ||||
IBM stockholders' equity: | ||||
Common stock | 64,600 | 63,318 | ||
Retained earnings | 155,937 | 155,648 | ||
Treasury stock - at cost | (170,934) | (170,605) | ||
Accumulated other comprehensive income/(loss) | (15,151) | (15,713) | ||
Total IBM stockholders' equity | 34,452 | 32,648 | ||
Noncontrolling interests | 89 | 93 | ||
Total equity | 34,541 | 32,740 | ||
Total liabilities and equity | $ 152,099 | $ 151,880 | ||
INTERNATIONAL BUSINESS MACHINES CORPORATION STATEMENT OF CASH FLOWS (Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
($ in millions) | 2026 | 2025 (1) | 2026 | 2025 (1) | ||||
Cash flows from operating activities: | ||||||||
Net income | $ 2,165 | $ 2,194 | $ 3,381 | $ 3,249 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation (2) | 533 | 578 | 1,088 | 1,114 | ||||
Amortization of capitalized software and acquired intangible assets | 817 | 687 | 1,535 | 1,328 | ||||
Stock-based compensation | 498 | 441 | 1,004 | 842 | ||||
Net (gain)/loss on divestitures, asset sales and other | (67) | (18) | (78) | (40) | ||||
Changes in operating assets and liabilities, net of acquisitions/divestitures | (1,349) | (2,180) | 836 | (421) | ||||
Net cash provided by operating activities | 2,597 | 1,701 | 7,766 | 6,071 | ||||
Cash flows from investing activities: | ||||||||
Payments for property, plant and equipment | (229) | (209) | (461) | (454) | ||||
Proceeds from disposition of property, plant and equipment/other | 23 | 37 | 31 | 111 | ||||
Investment in software | (154) | (164) | (313) | (314) | ||||
Purchases of marketable securities and other investments | (1,259) | (1,255) | (2,871) | (7,740) | ||||
Proceeds from disposition of marketable securities and other investments | 1,152 | 4,036 | 3,123 | 4,962 | ||||
Acquisition of businesses, net of cash acquired | (15) | (747) | (10,480) | (7,845) | ||||
Divestiture of businesses, net of cash transferred | - | - | 1 | (1) | ||||
Net cash provided by/(used in) investing activities | (481) | 1,698 | (10,970) | (11,281) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from new debt | 0 | 7 | 7,437 | 8,385 | ||||
Payments to settle debt | (4,213) | (1,308) | (7,141) | (2,565) | ||||
Short-term borrowings/(repayments) less than 90 days - net | 1 | 0 | 0 | (29) | ||||
Common stock repurchases for tax withholdings | (116) | (153) | (465) | (437) | ||||
Proceeds from issuance of shares | 240 | 186 | 418 | 401 | ||||
Financing - other | (49) | (22) | (91) | (54) | ||||
Cash dividends paid | (1,590) | (1,563) | (3,166) | (3,112) | ||||
Net cash provided by/(used in) financing activities | (5,728) | (2,855) | (3,008) | 2,589 | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (35) | 320 | (211) | 487 | ||||
Net change in cash, cash equivalents and restricted cash | (3,646) | 865 | (6,423) | (2,134) | ||||
Cash, cash equivalents and restricted cash at the beginning of the period | 10,864 | 11,161 | 13,640 | 14,160 | ||||
Cash, cash equivalents and restricted cash at the end of the period | $ 7,217 | $ 12,026 | $ 7,217 | $ 12,026 | ||||
_____________________ | ||||||||
(1) Reclassified to align with the Consolidated Statement of Cash Flows presentation. | ||||||||
(2) Includes operating lease right-of-use assets amortization. | ||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION (Unaudited) | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
($ in billions) | 2026 | 2025 | Yr/Yr | 2026 | 2025 | Yr/Yr | ||
Net income as reported (GAAP) | $ 2.2 | $ 2.2 | $ 0.0 | $ 3.4 | $ 3.2 | $ 0.1 | ||
Less: income from discontinued operations, net of tax | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
Income from continuing operations | 2.2 | 2.2 | 0.0 | 3.4 | 3.2 | 0.1 | ||
Provision for/(benefit from) income taxes from continuing ops. | 0.3 | 0.4 | (0.1) | 0.5 | 0.5 | 0.0 | ||
Pre-tax income from continuing operations (GAAP) | 2.5 | 2.6 | (0.1) | 3.9 | 3.8 | 0.1 | ||
Non-operating adjustments (before tax) | ||||||||
Acquisition-related charges (1) | 0.7 | 0.6 | 0.1 | 1.4 | 1.1 | 0.2 | ||
Non-operating retirement-related costs/(income) | 0.1 | 0.0 | 0.1 | 0.2 | 0.0 | 0.1 | ||
Operating (non-GAAP) pre-tax income from continuing ops. | 3.3 | 3.2 | 0.1 | 5.4 | 4.9 | 0.5 | ||
Net interest expense | 0.4 | 0.3 | 0.1 | 0.7 | 0.6 | 0.1 | ||
Depreciation/amortization of non-acquired intangible assets | 0.7 | 0.7 | 0.0 | 1.4 | 1.4 | 0.0 | ||
Stock-based compensation | 0.5 | 0.4 | 0.1 | 1.0 | 0.8 | 0.2 | ||
Workforce rebalancing charges | 0.0 | 0.0 | 0.0 | 0.4 | 0.3 | 0.0 | ||
Corporate (gains) and charges (2) | (0.1) | 0.0 | (0.1) | (0.1) | 0.0 | (0.1) | ||
Adjusted EBITDA | $ 4.8 | $ 4.7 | $ 0.1 | $ 8.8 | $ 8.1 | $ 0.7 | ||
Revenue | 1 % | 5 % | ||||||
GAAP net income margin | 12.6 % | 12.9 % | (0.3)pts | 10.2 % | 10.3 % | (0.1)pts | ||
Adjusted EBITDA margin | 27.8 % | 27.6 % | 0.2pts | 26.5 % | 25.7 % | 0.8pts | ||
___________________ | ||||||||
(1) Primarily consists of amortization of acquired intangible assets. | ||||||||
(2) Primarily consists of unique corporate actions such as gains on divestitures and asset sales. | ||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) | ||||||||||||
Three Months Ended June 30, 2026 | ||||||||||||
($ in millions) | Software | Consulting | Infrastructure | Financing | ||||||||
Revenue | $ 7,761 | $ 5,327 | $ 3,835 | $ 186 | ||||||||
Segment profit | $ 2,502 | $ 647 | $ 835 | $ 108 | ||||||||
Segment profit margin | 32.2 | % | 12.1 | % | 21.8 | % | 58.0 | % | ||||
Change YTY revenue | 5.1 | % | 0.2 | % | (7.4) | % | 12.2 | % | ||||
Change YTY revenue - constant currency | 4.6 | % | 1.1 | % | (7.4) | % | 11.3 | % | ||||
Three Months Ended June 30, 2025 | ||||||||||||
($ in millions) | Software | Consulting | Infrastructure | Financing | ||||||||
Revenue | $ 7,387 | $ 5,314 | $ 4,142 | $ 166 | ||||||||
Segment profit | $ 2,296 | $ 562 | $ 965 | $ 179 | ||||||||
Segment profit margin | 31.1 | % | 10.6 | % | 23.3 | % | 107.9 | % | ||||
Six Months Ended June 30, 2026 | ||||||||||||
(Dollars in Millions) | Software | Consulting | Infrastructure | Financing | ||||||||
Revenue | $ 14,813 | $ 10,599 | $ 7,161 | $ 406 | ||||||||
Segment Profit | $ 4,601 | $ 1,205 | $ 1,360 | $ 226 | ||||||||
Segment Profit Margin | 31.1 | % | 11.4 | % | 19.0 | % | 55.8 | % | ||||
Change YTY Revenue | 7.9 | % | 2.1 | % | 1.9 | % | 13.6 | % | ||||
Change YTY Revenue - Constant Currency | 6.1 | % | 1.0 | % | 0.5 | % | 10.7 | % | ||||
Six Months Ended June 30, 2025 | ||||||||||||
(Dollars in Millions) | Software | Consulting | Infrastructure | Financing | ||||||||
Revenue | $ 13,722 | $ 10,382 | $ 7,027 | $ 357 | ||||||||
Segment Profit | $ 4,143 | $ 1,121 | $ 1,213 | $ 248 | ||||||||
Segment Profit Margin | 30.2 | % | 10.8 | % | 17.3 | % | 69.3 | % | ||||
INTERNATIONAL BUSINESS MACHINES CORPORATION (Unaudited; $ in millions except per share amounts) | ||||||||||||||
Three Months Ended June 30, 2026 | ||||||||||||||
Continuing Operations | ||||||||||||||
GAAP | Acquisition- Related Adjustments (1) | Retirement- Related Adjustments (2) | Tax Reform Impacts | Operating (Non- GAAP) | ||||||||||
Gross profit | $ 9,907 | $ 287 | $ — | $ — | $ 10,194 | |||||||||
Gross profit margin | 57.7 | % | 1.7 | pts | — | pts | — | pts | 59.4 | % | ||||
SG&A | $ 4,981 | $ (421) | $ — | $ — | $ 4,560 | |||||||||
Other (income) & expense | (185) | 1 | (96) | — | (280) | |||||||||
Total expense & other (income) | 7,428 | (429) | (96) | — | 6,903 | |||||||||
Pre-tax income from continuing operations | 2,479 | 716 | 96 | — | 3,290 | |||||||||
Pre-tax income margin from continuing operations | 14.4 | % | 4.2 | pts | 0.6 | pts | — | pts | 19.2 | % | ||||
Provision for/(benefit from) income taxes (3) | $ 313 | $ 167 | $ 20 | $ (2) | $ 498 | |||||||||
Effective tax rate | 12.6 | % | 2.3 | pts | 0.2 | pts | (0.1) | pts | 15.1 | % | ||||
Income from continuing operations | $ 2,166 | $ 548 | $ 76 | $ 2 | $ 2,792 | |||||||||
Income margin from continuing operations | 12.6 | % | 3.2 | pts | 0.4 | pts | 0.0 | pts | 16.3 | % | ||||
Diluted earnings per share: continuing operations | $ 2.27 | $ 0.58 | $ 0.08 | $ 0.00 | $ 2.93 | |||||||||
Three Months Ended June 30, 2025 | ||||||||||||||
Continuing Operations | ||||||||||||||
GAAP | Acquisition- Related Adjustments (1) | Retirement- Related Adjustments (2) | Tax Reform Impacts | Operating (Non- GAAP) | ||||||||||
Gross profit | $ 9,977 | $ 225 | $ — | $ — | $ 10,202 | |||||||||
Gross profit margin | 58.8 | % | 1.3 | pts | — | pts | — | pts | 60.1 | % | ||||
SG&A | $ 5,027 | $ (348) | $ — | $ — | $ 4,679 | |||||||||
Other (income) & expense | (39) | (1) | (25) | — | (65) | |||||||||
Total expense & other (income) | 7,380 | (350) | (25) | — | 7,005 | |||||||||
Pre-tax income from continuing operations | 2,597 | 575 | 25 | — | 3,197 | |||||||||
Pre-tax income margin from continuing operations | 15.3 | % | 3.4 | pts | 0.1 | pts | — | pts | 18.8 | % | ||||
Provision for/(benefit from) income taxes (3) | $ 404 | $ 132 | $ 9 | $ — | $ 545 | |||||||||
Effective tax rate | 15.5 | % | 1.3 | pts | 0.2 | pts | — | pts | 17.0 | % | ||||
Income from continuing operations | $ 2,193 | $ 443 | $ 17 | $ — | $ 2,652 | |||||||||
Income margin from continuing operations | 12.9 | % | 2.6 | pts | 0.1 | pts | — | pts | 15.6 | % | ||||
Diluted earnings per share: continuing operations | $ 2.31 | $ 0.47 | $ 0.02 | $ — | $ 2.80 | |||||||||
____________________ | ||||||||||||||
(1) Includes amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as financing costs. | ||||||||||||||
(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. | ||||||||||||||
(3) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the GAAP pre-tax income. | ||||||||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION (Unaudited; $ in millions except per share amounts) | ||||||||||||||
Six Months Ended June 30, 2026 | ||||||||||||||
Continuing Operations | ||||||||||||||
GAAP | Acquisition- Related Adjustments (1) | Retirement- Related Adjustments (2) | Tax Reform Impacts | Operating (Non- GAAP) | ||||||||||
Gross Profit | $ 524 | $ — | $ — | $ 19,380 | ||||||||||
Gross Profit Margin | 57.0 | % | 1.6 | pts | — | pts | — | pts | 58.6 | % | ||||
SG&A | $ (829) | $ — | $ — | $ 9,242 | ||||||||||
Other (Income) & Expense | (186) | 1 | (192) | — | (378) | |||||||||
Total Expense & Other (Income) | 14,991 | (838) | (192) | — | 13,961 | |||||||||
Pre-tax Income from Continuing Operations | 3,866 | 1,361 | 192 | — | 5,419 | |||||||||
Pre-tax Income Margin from Continuing Operations | 11.7 | % | 4.1 | pts | 0.6 | pts | — | pts | 16.4 | % | ||||
Provision for/(Benefit from) Income Taxes (3) | $ 484 | $ 305 | $ 23 | $ (6) | $ 806 | |||||||||
Effective Tax Rate | 12.5 | % | 2.5 | pts | 0.0 | pts | (0.1) | pts | 14.9 | % | ||||
Income from Continuing Operations | $ 3,382 | $ 1,056 | $ 169 | $ 6 | $ 4,613 | |||||||||
Income Margin from Continuing Operations | 10.2 | % | 3.2 | pts | 0.5 | pts | 0.0 | pts | 13.9 | % | ||||
Diluted Earnings Per Share: Continuing Operations | $ 3.55 | $ 1.11 | $ 0.18 | $ 0.01 | $ 4.84 | |||||||||
Six Months Ended June 30, 2025 | ||||||||||||||
Continuing Operations | ||||||||||||||
GAAP | Acquisition- Related Adjustments (1) | Retirement- Related Adjustments (2) | Tax Reform Impacts | Operating (Non- GAAP) | ||||||||||
Gross Profit | $ 426 | $ — | $ — | $ 18,434 | ||||||||||
Gross Profit Margin | 57.1 | % | 1.4 | pts | — | pts | — | pts | 58.5 | % | ||||
SG&A | $ 9,913 | $ (701) | $ — | $ — | $ 9,212 | |||||||||
Other (Income) & Expense | (204) | (1) | (48) | — | (253) | |||||||||
Total Expense & Other (Income) | 14,253 | (706) | (48) | — | 13,499 | |||||||||
Pre-tax Income from Continuing Operations | 3,755 | 1,132 | 48 | — | 4,935 | |||||||||
Pre-tax Income Margin from Continuing Operations | 11.9 | % | 3.6 | pts | 0.2 | pts | — | pts | 15.7 | % | ||||
Provision for/(Benefit from) Income Taxes (3) | $ 507 | $ 260 | $ (3) | $ 2 | $ 766 | |||||||||
Effective Tax Rate | 13.5 | % | 2.2 | pts | (0.2) | pts | 0.0 | pts | 15.5 | % | ||||
Income from Continuing Operations | $ 3,248 | $ 872 | $ 51 | $ (2) | $ 4,169 | |||||||||
Income Margin from Continuing Operations | 10.3 | % | 2.8 | pts | 0.2 | pts | 0.0 | pts | 13.2 | % | ||||
Diluted Earnings Per Share: Continuing Operations | $ 3.43 | $ 0.92 | $ 0.05 | $ 0.00 | $ 4.40 | |||||||||
____________________ | ||||||||||||||
(1) Includes amortization of acquired intangible assets, and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as financing costs. | ||||||||||||||
(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. | ||||||||||||||
(3) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the GAAP pre-tax income. | ||||||||||||||
INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION (Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||
Net cash provided by operating activities per GAAP | $ 2,597 | $ 1,701 | $ 7,766 | $ 6,071 | ||||
Less: change in IBM Financing receivables | (302) | (1,480) | 2,264 | 606 | ||||
Net cash from operating activities excl. IBM Financing receivables | 2,899 | 3,182 | 5,503 | 5,465 | ||||
Capital expenditures, net | (359) | (336) | (743) | (657) | ||||
Free cash flow | $ 2,540 | $ 2,845 | $ 4,760 | $ 4,808 | ||||
INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION (Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
($ in billions) | 2026 | 2025 | 2026 | 2025 | ||||
Net cash provided by operating activities | $ 2.6 | $ 1.7 | $ 7.8 | $ 6.1 | ||||
Add: | ||||||||
Net interest expense | 0.4 | 0.3 | 0.7 | 0.6 | ||||
Provision for/(benefit from) income taxes from continuing operations | 0.3 | 0.4 | 0.5 | 0.5 | ||||
Less change in: | ||||||||
Financing receivables | (0.3) | (1.5) | 2.3 | 0.6 | ||||
Net (gain)/loss on divestitures, assets sales and other (1) | (0.1) | 0.0 | (0.1) | 0.0 | ||||
Other assets and liabilities/other, net (1,2) | (1.1) | (0.7) | (2.0) | (1.5) | ||||
Adjusted EBITDA | $ 4.8 | $ 4.7 | $ 8.8 | $ 8.1 | ||||
Revenue | ||||||||
Net cash provided by operating activities margin | 15.1 % | 10.0 % | 23.5 % | 19.3 % | ||||
Adjusted EBITDA margin | 27.8 % | 27.6 % | 26.5 % | 25.7 % | ||||
____________________ | ||||||||
(1) Reclassified to align with the presentation of similar line items in the Statement of Cash Flows. | ||||||||
(2) Mainly consists of Changes in operating assets and liabilities, net of acquisitions/divestitures in the Statement of Cash Flows chart, workforce rebalancing charges, non-operating impacts, and corporate (gains) and charges, less the change in Financing receivables. | ||||||||
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SOURCE IBM