IBM RELEASES THIRD-QUARTER RESULTS

Software growth and higher cash generation accompanied lower GAAP margins and an increase in debt.

Rhea-AI Summary

IBM (NYSE: IBM) reported third-quarter 2026 revenue of $17.1 billion and raised its outlook for full-year free cash flow growth. Revenue rose 5% year over year, or 6% excluding currency effects. GAAP earnings per diluted share from continuing operations increased 26% to $2.31. Software revenue grew 8% to $7.8 billion, Infrastructure rose 4% to $3.7 billion, and Consulting was flat at $5.3 billion.

GAAP gross margin fell to 56.8% from 57.3%, while pre-tax margin declined to 14.6% from 14.9%. Quarterly operating cash flow reached $4.0 billion, and free cash flow was $3.0 billion. IBM expects full-year free cash flow to increase by more than $1 billion year over year and maintained its forecast for 4–5% revenue growth excluding currency effects. Cash, restricted cash and marketable securities fell $3.4 billion from year-end to $11.1 billion; debt increased $2.6 billion to $63.8 billion.

21 points · 1 major

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0 major · 15 points

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Positive

• Major point. Forward-looking: it has not happened yet and may not happen.IBM raised its full-year outlook, expecting free cash flow growth of more than $1 billion year over year.
• Moderate pointThird-quarter revenue rose 5% year over year to $17.1 billion, or 6% excluding currency effects.
• Moderate pointGAAP continuing-operations diluted EPS increased 26% year over year to $2.31 in the third quarter.
• Moderate pointGAAP third-quarter continuing-operations net income increased 26% year over year to $2.2 billion.
• Moderate pointGAAP third-quarter pre-tax income increased 3% year over year to $2.5 billion.
• Moderate pointSoftware revenue grew 8% year over year to $7.8 billion, or 9% excluding currency effects.
• Moderate pointInfrastructure revenue increased 4% to $3.7 billion year over year, or 5% excluding currency effects.
• Moderate pointThird-quarter operating cash flow increased $0.9 billion year over year to $4.0 billion.
• Moderate pointThird-quarter free cash flow increased $0.7 billion year over year to $3.0 billion.
• Moderate point. Forward-looking: it has not happened yet and may not happen.IBM continues to expect full-year revenue growth of 4–5% excluding currency effects.

11 minor points

• Minor pointHybrid Cloud (Red Hat) revenue increased 11% year over year in the third quarter.
• Minor pointData revenue increased 19% year over year, or 20% excluding currency effects.
• Minor pointTransaction Processing revenue increased 9% year over year, or 10% excluding currency effects.
• Minor pointConsulting revenue was flat at $5.3 billion, but grew 2% year over year excluding currency effects.
• Minor pointStrategy and Technology revenue increased 2% year over year, or 4% excluding currency effects.
• Minor pointHybrid Infrastructure revenue increased 8% year over year, or 9% excluding currency effects.
• Minor pointDistributed Infrastructure revenue increased 31% year over year, or 32% excluding currency effects.
• Minor pointNine-month operating cash flow increased $2.6 billion year over year to $11.8 billion.
• Minor pointNine-month free cash flow increased $0.6 billion year over year to $7.8 billion.
• Minor pointThird-quarter selling, general and administrative expenses declined to $4,620 million from $4,748 million a year earlier.
• Minor pointThird-quarter effective tax rate fell to 11.9% from 28.2% a year earlier.

Negative

• Moderate pointDebt increased $2.6 billion year to date to $63.8 billion, including $12.7 billion of IBM Financing debt.
• Moderate pointCash, restricted cash and marketable securities fell $3.4 billion from year-end 2025 to $11.1 billion.
• Moderate pointConsulting third-quarter gross margin fell to 27.4% from 29.3% a year earlier.
• Minor pointGAAP third-quarter gross margin declined 50 basis points year over year to 56.8%.
• Minor pointGAAP third-quarter pre-tax margin declined 30 basis points year over year to 14.6%.

10 minor points

• Minor pointIBM Z revenue declined 20% year over year, or 19% excluding currency effects.
• Minor pointAutomation revenue declined 3% year over year in the third quarter.
• Minor pointIntelligent Operations revenue declined 2% year over year; revenue was flat excluding currency effects.
• Minor pointInfrastructure Support revenue declined 3% year over year, or 2% excluding currency effects.
• Minor pointFinancing revenue declined 4% to $0.2 billion year over year, or 3% excluding currency effects.
• Minor pointSoftware third-quarter gross margin fell to 82.5% from 83.1% a year earlier.
• Minor pointInfrastructure third-quarter gross margin fell to 56.7% from 57.2% a year earlier.
• Minor pointFinancing third-quarter gross margin fell to 40.7% from 45.6% a year earlier.
• Minor pointThird-quarter research and development expenses increased to $2,378 million from $2,082 million a year earlier.
• Minor pointThird-quarter intellectual property and custom development income declined to $164 million from $219 million a year earlier.

News Explained

IBM’s board approved a regular quarterly cash dividend of $1.69 per common share, payable December 10, 2026 to holders of record November 10, 2026, committing a cash distribution to eligible holders.

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Key Figures

Third-quarter revenue: $17.1 billion; up 5% Diluted GAAP EPS: $2.30; up 26% Operating non-GAAP diluted EPS: $2.95; up 11% +5 more

Third-quarter revenue

$17.1 billion; up 5%

Third quarter 2026, year over year

Diluted GAAP EPS

$2.30; up 26%

Third quarter 2026, year over year

Operating non-GAAP diluted EPS

$2.95; up 11%

Third quarter 2026, year over year

GAAP gross profit margin

56.8%; down 50 basis points

Third quarter 2026, year over year

Free cash flow

$3.0 billion; up $0.7 billion

Third quarter 2026, year over year

Full-year revenue growth outlook

4%–5%

2026, constant currency; outlook maintained

Full-year free cash flow outlook

Increase of more than $1 billion

2026, year over year

Quarterly cash dividend

$1.69 per common share

Regular quarterly dividend

Key Terms

constant currency, free cash flow, gaap, non-gaap

4 terms

constant currency financial

"we continue to expect constant currency revenue growth"

Constant currency is a way of measuring financial results that removes the effects of changes in currency exchange rates. It allows for a clearer comparison of a company's performance over time by showing what the numbers would look like if exchange rates had stayed the same. This helps investors understand whether growth comes from actual business improvements or just currency fluctuations.

free cash flow financial

"we now expect free cash flow to increase by more than $1 billion"

Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.

View in glossary

gaap financial

"generally accepted accounting principles (GAAP)"

GAAP, or Generally Accepted Accounting Principles, are a set of standardized rules and guidelines that companies follow when preparing their financial statements. They ensure consistency, transparency, and comparability across different companies, making it easier for investors to understand and compare financial information accurately. This helps investors make informed decisions based on trustworthy and uniform financial reports.

View in glossary

non-gaap financial

"the following non-GAAP information"

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

View in glossary

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

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, 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-3q26. 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 September 30,						Nine Months Ended September 30,
	2026			2025			2026			2025
REVENUE BY SEGMENT
Software	$        7,804			$        7,209			$       22,617			$       20,932
Consulting	5,335			5,324			15,934			15,706
Infrastructure	3,707			3,559			10,868			10,586
Financing	192			200			598			557
Other	66			38			165			68
TOTAL REVENUE	17,103			16,331			50,182			47,849
GROSS PROFIT	9,714			9,360			28,571			27,369
GROSS PROFIT MARGIN
Software	82.5	%		83.1	%		82.6	%		83.5	%
Consulting	27.4	%		29.3	%		27.9	%		28.0	%
Infrastructure	56.7	%		57.2	%		57.4	%		57.7	%
Financing	40.7	%		45.6	%		42.2	%		45.7	%
TOTAL GROSS PROFIT MARGIN	56.8	%		57.3	%		56.9	%		57.2	%
EXPENSE AND OTHER INCOME
SG&A	4,620			4,748			14,691			14,661
R&D	2,378			2,082			6,863			6,129
Intellectual property and custom development income	(164)			(219)			(501)			(687)
Other (income) and expense	(109)			(173)			(296)			(376)
Interest expense	491			492			1,451			1,457
TOTAL EXPENSE AND OTHER INCOME	7,217			6,931			22,208			21,184
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	2,497			2,430			6,363			6,185
Pre-tax income margin	14.6	%		14.9	%		12.7	%		12.9	%
Provision for/(benefit from) income taxes	298			686			782			1,193
Effective tax rate	11.9	%		28.2	%		12.3	%		19.3	%
INCOME FROM CONTINUING OPERATIONS	$        2,199			$        1,744			$         5,581			$         4,992
DISCONTINUED OPERATIONS
Income from discontinued operations, net of taxes	(10)			0			(10)			1
NET INCOME	$        2,190			$        1,744			$         5,571			$         4,993
EARNINGS PER SHARE OF COMMON STOCK
Assuming dilution
Continuing operations	$          2.31			$          1.84			$           5.86			$           5.27
Discontinued operations	$         (0.01)			$          0.00			$          (0.01)			$           0.00
TOTAL	$          2.30			$          1.84			$           5.85			$           5.27
Basic
Continuing operations	$          2.33			$          1.87			$           5.93			$           5.36
Discontinued operations	$         (0.01)			$          0.00			$          (0.01)			$           0.00
TOTAL	$          2.32			$          1.87			$           5.92			$           5.36
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M's)
Assuming dilution	953.5			948.9			953.0			947.4
Basic	944.4			933.9			941.4			930.9

 

INTERNATIONAL BUSINESS MACHINES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET   (Unaudited)
($ in millions)		At September 30, 2026		At December 31, 2025
ASSETS:
Current assets:
Cash and cash equivalents		$                 9,233		$              13,587
Restricted cash		48		54
Marketable securities		1,825		830
Notes and accounts receivable - trade, net		5,794		8,112
Short-term financing receivables
Held for investment, net		5,638		7,344
Held for sale		774		1,131
Other accounts receivable, net		1,673		1,052
Inventories		1,945		1,220
Deferred costs		1,177		1,084
Prepaid expenses and other current assets		3,083		2,530
Total current assets		31,192		36,944
Property, plant and equipment, net		6,043		5,899
Operating right-of-use assets, net		3,114		3,129
Long-term financing receivables, net		6,844		7,708
Prepaid pension assets		7,715		7,544
Deferred costs		808		825
Deferred taxes		8,827		8,610
Goodwill		74,916		67,717
Intangibles, net		13,603		11,391
Investments and sundry assets		1,950		2,112
Total assets		$             155,011		$            151,880
LIABILITIES:
Current Liabilities:
Taxes		$                 1,867		$                2,347
Short-term debt		7,013		6,424
Accounts payable		4,491		4,756
Compensation and benefits		3,668		4,114
Deferred income		15,164		16,101
Operating lease liabilities		749		800
Other liabilities		3,534		4,116
Total current liabilities		36,485		38,658
Long-term debt		56,804		54,836
Retirement-related obligations		8,452		9,018
Deferred income		4,318		4,271
Operating lease liabilities		2,574		2,547
Other liabilities		10,172		9,810
Total liabilities		118,805		119,139
EQUITY:
IBM stockholders' equity:
Common stock		65,137		63,318
Retained earnings		156,576		155,648
Treasury stock - at cost		(171,191)		(170,605)
Accumulated other comprehensive income/(loss)		(14,985)		(15,713)
Total IBM stockholders' equity		35,537		32,648
Noncontrolling interests		669		93
Total equity		36,206		32,740
Total liabilities and equity		$             155,011		$            151,880

 

INTERNATIONAL BUSINESS MACHINES CORPORATION STATEMENT OF CASH FLOWS (Unaudited)
		Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)		2026		2025 (1)		2026		2025 (1)
Cash flows from operating activities:
Net income		$     2,190		$     1,744		$     5,571		$     4,993
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation (2)		550		583		1,638		1,698
Amortization of capitalized software and acquired intangible assets		828		699		2,363		2,027
Stock-based compensation		535		444		1,539		1,285
Net (gain)/loss on divestitures, asset sales and other		(47)		(6)		(124)		(46)
Changes in operating assets and liabilities, net of acquisitions/divestitures		(31)		(383)		804		(804)
Net cash provided by operating activities		4,025		3,081		11,791		9,153
Cash flows from investing activities:
Payments for property, plant and equipment		(332)		(255)		(793)		(709)
Proceeds from disposition of property, plant and equipment/other		29		7		60		118
Investment in software		(154)		(162)		(467)		(476)
Purchases of marketable securities and other investments		(1,898)		(1,169)		(4,769)		(8,910)
Proceeds from disposition of marketable securities and other investments		640		1,199		3,763		6,162
Acquisition of businesses, net of cash acquired		(884)		(58)		(11,364)		(7,903)
Divestiture of businesses, net of cash transferred		28		-		30		(1)
Net cash provided by/(used in) investing activities		(2,570)		(437)		(13,539)		(11,719)
Cash flows from financing activities:
Proceeds from new debt		1,978		6		9,415		8,391
Payments to settle debt		(120)		(1,114)		(7,261)		(3,679)
Short-term borrowings/(repayments) less than 90 days - net		2		0		3		(29)
Common stock repurchases for tax withholdings		(352)		(414)		(817)		(851)
Proceeds from issuance of shares		143		134		562		535
Noncontrolling interest transactions (3)		575		-		557		(15)
Financing - other (3)		(24)		(54)		(98)		(93)
Cash dividends paid		(1,596)		(1,569)		(4,762)		(4,681)
Net cash provided by/(used in) financing activities		607		(3,012)		(2,402)		(423)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		3		(59)		(209)		429
Net change in cash, cash equivalents and restricted cash		2,064		(426)		(4,359)		(2,561)
Cash, cash equivalents and restricted cash at the beginning of the period		7,217		12,026		13,640		14,160
Cash, cash equivalents and restricted cash at the end of the period		$     9,282		$   11,600		$     9,282		$   11,600
____________________
(1) Reclassified to align with the Consolidated Statement of Cash Flows presentation.
(2) Includes operating lease right-of-use assets amortization.
(3) Prior-year amounts have been reclassified to conform to the change in 2026 presentation.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION (Unaudited)
		Three Months Ended September 30,				Nine Months Ended September 30,
($ in billions)		2026	2025	Yr/Yr		2026	2025	Yr/Yr
Net income as reported (GAAP)		$   2.2	$   1.7	$  0.4		$   5.6	$   5.0	$  0.6
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	1.7	0.5		5.6	5.0	0.6
Provision for/(benefit from) income taxes from continuing ops.		0.3	0.7	(0.4)		0.8	1.2	(0.4)
Pre-tax income from continuing operations (GAAP)		2.5	2.4	0.1		6.4	6.2	0.2
Non-operating adjustments (before tax)
Acquisition-related charges (1)		0.7	0.6	0.1		2.1	1.7	0.3
Non-operating retirement-related costs/(income)		0.1	0.0	0.1		0.3	0.1	0.2
Operating (non-GAAP) pre-tax income from continuing ops.		3.3	3.0	0.3		8.7	8.0	0.7
Net interest expense		0.4	0.3	0.1		1.1	0.9	0.2
Depreciation/amortization of non-acquired intangible assets		0.7	0.7	0.0		2.1	2.1	0.0
Stock-based compensation		0.5	0.4	0.1		1.5	1.3	0.3
Workforce rebalancing charges		0.0	0.0	0.0		0.4	0.4	0.0
Corporate (gains) and charges (2)		0.0	0.0	0.0		(0.2)	0.0	(0.2)
Adjusted EBITDA		$   4.9	$   4.6	$  0.3		$ 13.7	$ 12.7	$  1.0
Revenue		$ 17.1	$ 16.3	5 %		$ 50.2	$ 47.8	5 %
GAAP net income margin		12.8 %	10.7 %	2.1pts		11.1 %	10.4 %	0.7pts
Adjusted EBITDA margin		28.7 %	28.0 %	0.6pts		27.2 %	26.5 %	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 September 30, 2026
($ in millions)		Software			Consulting			Infrastructure			Financing
Revenue		$         7,804			$         5,335			$            3,707			$           192
Segment profit		$         2,734			$            653			$               715			$           108
Segment profit margin		35.0	%		12.2	%		19.3	%		56.1	%
Change YTY revenue		8.2	%		0.2	%		4.2	%		(3.9)	%
Change YTY revenue - constant currency		8.7	%		1.8	%		4.9	%		(3.3)	%
		Three Months Ended September 30, 2025
($ in millions)		Software			Consulting			Infrastructure			Financing
Revenue		$         7,209			$         5,324			$            3,559			$           200
Segment profit		$         2,374			$            686			$               644			$           123
Segment profit margin		32.9	%		12.9	%		18.1	%		61.6	%
		Nine Months Ended September 30, 2026
($ in millions)		Software			Consulting			Infrastructure			Financing
Revenue		$        22,617			$        15,934			$          10,868			$           598
Segment Profit		$          7,335			$          1,858			$            2,074			$           334
Segment Profit Margin		32.4	%		11.7	%		19.1	%		55.9	%
Change YTY Revenue		8.1	%		1.5	%		2.7	%		7.3	%
Change YTY Revenue - Constant Currency		7.0	%		1.2	%		1.9	%		5.7	%
		Nine Months Ended September 30, 2025
($ in millions)		Software			Consulting			Infrastructure			Financing
Revenue		$        20,932			$        15,706			$          10,586			$           557
Segment Profit		$          6,517			$          1,807			$            1,857			$           371
Segment Profit Margin		31.1	%		11.5	%		17.5	%		66.5	%

 

INTERNATIONAL BUSINESS MACHINES CORPORATION U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; $ in millions except per share amounts)
	Three Months Ended September 30, 2026
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Operating (Non- GAAP)
Gross profit	$  9,714			$                   289			$                     —			$         —			$       10,004
Gross profit margin	56.8	%		1.7	pts		—	pts		—	pts		58.5	%
SG&A	$  4,620			$                 (428)			$                     —			$         —			$         4,193
Other (income) & expense	(109)			0			(91)			—			(200)
Total expense & other (income)	7,217			(418)			(91)			—			6,708
Pre-tax income from continuing operations	2,497			707			91			—			3,295
Pre-tax margin from continuing operations	14.6	%		4.1	pts		0.5	pts		—	pts		19.3	%
Provision for/(benefit from) income taxes (3)	$     298			$                  166			$                    20			—			$            483
Effective tax rate	11.9	%		2.5	pts		0.3	pts		—	pts		14.7	%
Income from continuing operations	$  2,199			$                  542			$                    71			$         —			$         2,812
Income margin from continuing operations	12.9	%		3.2	pts		0.4	pts		—	pts		16.4	%
Diluted earnings per share: continuing operations	$    2.31			$                 0.57			$                 0.07			$         —			$           2.95
	Three Months Ended September 30, 2025
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Operating (Non- GAAP)
Gross profit	$  9,360			$                   231			$                     —			$         —			$         9,591
Gross profit margin	57.3	%		1.4	pts		—	pts		—	pts		58.7	%
SG&A	$  4,748			$                 (354)			$                     —			$         —			$         4,394
Other (income) & expense	(173)			(6)			(13)			—			(191)
Total expense & other (income)	6,931			(359)			(13)			—			6,559
Pre-tax income from continuing operations	2,430			590			13			—			3,033
Pre-tax margin from continuing operations	14.9	%		3.6	pts		0.1	pts		—	pts		18.6	%
Provision for/(benefit from) income taxes (3)	$     686			$                   136			$                       3			$      (309)			$            516
Effective tax rate	28.2	%		(1.0)	pts		0.0	pts		(10.2)	pts		17.0	%
Income from continuing operations	$  1,744			$                   454			$                     10			$       309			$         2,517
Income margin from continuing operations	10.7	%		2.8	pts		0.1	pts		1.9	pts		15.4	%
Diluted earnings per share: continuing operations	$    1.84			$                  0.48			$                  0.01			$      0.33			$           2.65
____________________
(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 U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION (Unaudited; $ in millions except per share amounts)
	Nine Months Ended September 30, 2026
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Operating (Non- GAAP)
Gross Profit	$ 28,571			$                   813			$                     —			$        —			$    29,384
Gross Profit Margin	56.9	%		1.6	pts		—	pts		—	pts		58.6	%
SG&A	$ 14,691			$              (1,257)			$                     —			$        —			$    13,435
Other (Income) & Expense	(296)			1			(283)			—			(578)
Total Expense & Other (Income)	22,208			(1,256)			(283)			—			20,669
Pre-tax Income from Continuing Operations	6,363			2,069			283			—			8,715
Pre-tax Margin from Continuing Operations	12.7	%		4.1	pts		0.6	pts		—	pts		17.4	%
Provision for/(Benefit from) Income Taxes (3)	$      782			$                  470			$                    43			$         (6)			$      1,290
Effective Tax Rate	12.3	%		2.5	pts		0.1	pts		(0.1)	pts		14.8	%
Income from Continuing Operations	$   5,581			$               1,598			$                  240			$          6			$      7,425
Income Margin from Continuing Operations	11.1	%		3.2	pts		0.5	pts		0.0	pts		14.8	%
Diluted Earnings Per Share: Continuing Operations	$     5.86			$                 1.68			$                 0.25			$     0.01			$        7.79
	Nine Months Ended September 30, 2025
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Operating (Non- GAAP)
Gross Profit	$ 27,369			$                   657			$                     —			$        —			$    28,025
Gross Profit Margin	57.2	%		1.4	pts		—	pts		—	pts		58.6	%
SG&A	$ 14,661			$              (1,055)			$                     —			$        —			$    13,606
Other (Income) & Expense	(376)			(7)			(61)			—			(444)
Total Expense & Other (Income)	21,184			(1,066)			(61)			—			20,058
Pre-tax Income from Continuing Operations	6,185			1,723			61			—			7,968
Pre-tax Margin from Continuing Operations	12.9	%		3.6	pts		0.1	pts		—	pts		16.7	%
Provision for/(Benefit from) Income Taxes (3)	$   1,193			$                  396			$                      0			$     (307)			$      1,282
Effective Tax Rate	19.3	%		0.8	pts		(0.2)	pts		(3.9)	pts		16.1	%
Income from Continuing Operations	$   4,992			$               1,326			$                    61			$      307			$      6,686
Income Margin from Continuing Operations	10.4	%		2.8	pts		0.1	pts		0.6	pts		14.0	%
Diluted Earnings Per Share: Continuing Operations	$     5.27			$                 1.40			$                 0.06			$     0.32			$        7.06
____________________
(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 September 30,				Nine Months Ended September 30,
($ in millions)		2026		2025		2026		2025
Net cash provided by operating activities per GAAP		$     4,025		$     3,081		$   11,791		$     9,153
Less: change in IBM Financing receivables		541		298		2,805		905
Net cash from operating activities excl. IBM Financing receivables		3,484		2,783		8,986		8,248
Capital expenditures, net		(457)		(410)		(1,200)		(1,067)
Free cash flow		$     3,027		$     2,373		$     7,787		$     7,181

 

INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION (Unaudited)
		Three Months Ended September 30,				Nine Months Ended September 30,
($ in billions)		2026		2025		2026		2025
Net cash provided by operating activities		$   4.0		$   3.1		$ 11.8		$   9.2
Add:
Net interest expense		0.4		0.3		1.1		0.9
Provision for/(benefit from) income taxes from continuing operations		0.3		0.7		0.8		1.2
Less change in:
Financing receivables		0.5		0.3		2.8		0.9
Net (gain)/loss on divestitures, assets sales and other (1)		0.0		0.0		(0.1)		0.0
Other assets and liabilities/other, net (1,2)		(0.7)		(0.8)		(2.6)		(2.2)
Adjusted EBITDA		$   4.9		$   4.6		$ 13.7		$ 12.7
Revenue		$ 17.1		$ 16.3		$ 50.2		$ 47.8
Net cash provided by operating activities margin		23.5 %		18.9 %		23.5 %		19.1 %
Adjusted EBITDA margin		28.7 %		28.0 %		27.2 %		26.5 %
____________________
(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

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were IBM's third-quarter 2026 revenue and earnings per share?

IBM reported revenue of $17.1 billion, up 5% year over year, and GAAP diluted earnings per share from continuing operations of $2.31, up 26%. Total diluted earnings per share, including discontinued operations, were $2.30, compared with $1.84 a year earlier.

What is IBM's updated full-year 2026 outlook?

IBM expects full-year free cash flow to increase by more than $1 billion year over year and continues to expect revenue growth of 4–5% excluding currency effects. At current foreign exchange rates, the company expects currency to be neutral to revenue growth for the year.

How much did IBM invest in acquisitions during 2026?

IBM invested $11.4 billion in acquisitions during the first nine months of 2026.

When will IBM pay its declared quarterly dividend, and how much is it?

IBM will pay its regular quarterly cash dividend of $1.69 per common share on December 10, 2026, to stockholders of record on November 10, 2026. IBM returned $1.6 billion to shareholders through dividends in the third quarter.