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International Business Machines (IBM) Q3 2026 Earnings Report

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DE:IBM Q3 2026 EPS Results

Actual EPS
EUR 2.64
Consensus EPS
EUR 2.56
Beat/Miss
Beat by +EUR 0.08
One Year Ago EPS
EUR 2.37

DE:IBM Q3 2026 Revenue Results

Actual Revenue
EUR 15.31B
Expected Revenue
EUR 15.07B
Beat/Miss
Beat by +EUR 243.11M
YoY Revenue Growth
+4.73%

Earnings Announcement Details

Quarter
Q3 2026
Date
10/21/2026
Time
After Close
Conference Call
Wednesday, October 21, 2026
DE:IBM Upcoming Earnings

International Business Machines's next earnings date is estimated for January 27, 2027, based on past reporting schedules.

Q3 2026 Earnings Call Audio

DE:IBM Q3 2026 Earnings Call
0:00 / 0:00

Q3 2026 Earnings Slide Deck

Q3 2026 Earnings Call Summary

Q3 2026
Earnings Call Date:Oct 21, 2026|% Change Since:3.23%|
Earnings Call Sentiment|Positive

The call was strongly positive. IBM reported accelerated revenue growth, broad-based software and infrastructure momentum, improved margins, record first-nine-month free cash flow margin, strong IBM Z and AI-related demand, and a higher free cash flow outlook. The main challenges were modest consulting growth, a consulting margin decline, higher CapEx, cash taxes and interest expense, expected moderation in transaction processing, and the operational complexity of scaling enterprise AI.

Company Guidance

For 2026, IBM continues to expect revenue growth in the range of 4%-5%, with profit, free cash flow, and segment expectations anchored to a 4% base case, and has raised its expectation for free cash flow growth to more than $1 billion. Full-year software growth is expected to be approximately 7%-8%, with about 7% as the revised base case; hybrid cloud is expected to deliver double-digit growth, data mid-teens growth, automation low double-digit growth, transaction processing flat growth, infrastructure low double-digit infrastructure revenue growth, and consulting modest acceleration to low to mid-single digit revenue growth. IBM continues to expect 100 basis points of operating pre-tax margin expansion, while its operating tax rate expectation remains in the mid-teens, and it expects Red Hat to deliver double-digit growth in the fourth quarter of this year.

  • Accelerated Third-Quarter Revenue GrowthThird-quarter revenue growth accelerated to 6%, above the base case laid out in July, with growth across the segments led by software at 9%, infrastructure at 5%, and modest improvement in consulting.
  • Improved Profitability and EarningsIBM delivered 70 basis points of operating pre-tax margin expansion, 11% diluted operating earnings per share growth, and adjusted EBITDA and operating pre-tax margin expansion of 60 and 70 basis points, respectively.
  • Strong Free Cash Flow GenerationThrough the first nine months, IBM generated about $8 billion of free cash flow, up about 8% year over year or approximately $600 million. The company said its free cash flow margin for the first nine months was the highest in reported history and raised its full-year free cash flow growth expectation to more than $1 billion.
  • Software Growth and Recurring Revenue StrengthSoftware revenue growth accelerated four points sequentially to 9%, including over four points of organic growth. Annual recurring revenue grew 8% to $24.9 billion, and three of the four software sub-segments grew revenue double digits. IBM said approximately one-quarter of the software acceleration came from previously slipped deals and about three-quarters from net new business.
  • Red Hat and OpenShift MomentumRed Hat revenue grew 11% again, with bookings growth accelerating back to the high teens. OpenShift ARR growth accelerated to over 30% and reached a $2.4 billion ARR business. IBM said it expects double-digit Red Hat growth in the fourth quarter.
  • Lightwell Early DemandLightwell was made generally available and generated strong early demand, with a pipeline approaching $700 million. IBM and Red Hat have released more than 40,000 remediated packages to the Lightwell network.
  • Data and Confluent GrowthData revenue grew 20%, supported by continued strength in Confluent, whose bookings grew about 20%. IBM highlighted the planned Streamhouse capability as a cross-sell and upsell opportunity on top of Confluent for real-time, governed data supporting applications, analytics, and AI.
  • Transaction Processing RecoveryTransaction processing revenue grew 10%, which IBM attributed to mission-critical software demand, strong pipeline execution, and the recovery of deferred second-quarter transactions alongside a normal third-quarter buying cycle. IBM said the result supported its view that the prior-quarter softness reflected timing rather than demand destruction.
  • Infrastructure and Storage MomentumInfrastructure revenue grew 5%, driven by 32% growth in distributed infrastructure. Storage delivered record revenue growth and continued to gain market share across FlashSystem, Storage Fusion, Tape, and IBM Z Storage. IBM exited the quarter with a sizable distributed-infrastructure backlog.
  • Strong IBM Z and z17 PerformanceThe z17 program generated more than $1 billion of incremental revenue over six quarters compared with prior programs and delivered the strongest mid-range IBM Z revenue launch in nearly two decades. Installed MIPS were up 18% through six quarters, while shipped MIPS were up over 100%. IBM said approximately 85% of installed MIPS capacity customers are maintaining or growing capacity, and aggregated installed capacity has tripled over the last few programs.
  • Consulting AI Transformation DemandConsulting revenue grew 2%, led by strategy and technology growth of 4%, with strength in application modernization, data and AI transformation, and cybersecurity. AI represented about 30% of consulting revenue and 35% of consulting backlog. IBM also cited new strategic partnerships with OpenAI and an expanded relationship with Google Cloud.
  • AI Platform Expansion and Cost OptimizationIBM described an integrated AI platform spanning Confluent, watsonx, HashiCorp, Apptio, and Red Hat. Apptio now connects AI spending to business results, while the llm-d open-source project developed with Red Hat and Google is intended to help clients run large AI models at 5 to 10 times lower cost by reusing previously processed context. IBM Bob now runs on-premises for regulated and sovereign environments.
  • Enterprise AI Security and GovernanceHashiCorp Vault enables clients to register, authorize, audit, and revoke AI agents and secure their credentials. IBM Agent Identity and HashiCorp Vault are partnering with NVIDIA's Open Agent Safety Platform to strengthen agent security. IBM also said sovereign AI conversations are becoming more significant in 2026 as enterprises seek to keep models, data, and logs under their control.
  • Quantum Computing MilestonesIBM cited three independent demonstrations of quantum advantage on its hardware. The Nighthawk r2 processor reached 7,500 gates and 100,000 circuits per second, with performance improvements of up to 19 times over prior-generation systems. IBM was selected for Stage C of DARPA's Quantum Benchmarking Initiative and signed 16 enterprise quantum engagements this year.
  • Quantum Commercial and Manufacturing ProgressAT&T, General Motors, and other enterprises joined the IBM Quantum Network, described as the world's largest network of quantum innovators. IBM also connected its first modular cryogenic systems, continued progress on its 300,000-square-foot Poughkeepsie manufacturing facility, and closed a $1 billion Department of Commerce award for quantum-wafer manufacturing.
  • Productivity and Operating-Leverage GainsIBM reported 500 basis points of gross productivity in the third quarter and more than $5.5 billion of productivity gains over several years. Software segment profit margin expanded 210 basis points and infrastructure segment profit margin expanded 120 basis points, driven by productivity actions. The company said it is deploying AI and automation across the business, reducing third-party spend, improving sales and marketing efficiency, optimizing its supply chain, and enhancing services delivery.
  • Full-Year Outlook Raised for Free Cash FlowIBM maintained its 2026 revenue growth expectation of 4%-5% and continued to expect 100 basis points of full-year operating pre-tax margin expansion. It raised its free cash flow growth expectation to more than $1 billion and increased its full-year software growth expectation to approximately 7%-8%, with about 7% as the revised base case.
  • Segment Outlook Remains ConstructiveIBM expects double-digit growth in hybrid cloud, mid-teens growth in data, low double-digit growth in automation, flat transaction-processing growth for the full year, low double-digit infrastructure revenue growth, and low to mid-single-digit consulting revenue growth.
  • Balance Sheet and Shareholder ReturnsIBM exited the quarter with $11.1 billion of cash and a solid investment-grade balance sheet. It returned $4.8 billion to shareholders through dividends during the first nine months. The debt balance was $63.8 billion, including $12.7 billion related to the financing business, whose receivables portfolio was almost 80% investment grade.

DE:IBM Earnings History

DE:IBM earnings history
Report DateFiscal QuarterForecast / EPSLast Year's EPSEPS YoY ChangePress Release
Jan 27, 20272026 (Q4)4.14-4.05――
Oct 21, 20262026 (Q3)2.562.642.3711.32% (+0.27)
Jul 22, 20262026 (Q2)2.642.622.514.64% (+0.12)
Apr 22, 20262026 (Q1)1.621.711.4319.38% (+0.28)
Jan 28, 20262025 (Q4)3.864.053.5115.31% (+0.54)
Oct 22, 20252025 (Q3)2.192.372.0615.22% (+0.31)
Jul 23, 20252025 (Q2)2.372.512.1815.23% (+0.33)
Apr 23, 20252025 (Q1)1.271.431.5-4.76% (-0.07)
Jan 29, 20252024 (Q4)3.383.513.471.29% (+0.04)
Oct 23, 20242024 (Q3)1.992.061.974.55% (+0.09)

The table shows recent earnings report dates and whether the forecast was beat or missed. See the change in forecast and EPS from the previous year.

Beat Missed