Arvind Krishna, CEO of International Business Machines Corp. (IBM), speaks during an executive order signing in the Oval Office of the White House in Washington, DC, U.S., Monday, June 22, 2026.
Bonnie Cash | Bloomberg | Getty Images
IBM Shares slipped in extended trading Wednesday after the technology provider reported better-than-expected third-quarter results.
Here is the company’s performance compared to the LSEG consensus:
- Winnings: $2.95 adjusted versus $2.86 expected
- Income: $17.10 billion versus $16.82 billion expected
IBM’s revenue increased about 5% from last year, according to a statement. Net income, at $2.19 billion, or $2.30 per share, increased from $1.74 billion, or $1.84 per share, a year ago. Adjusted profit excludes adjustments related to acquisitions.
“Our customers are now deploying ‘Super Intelligence’ to transform entire business models, rather than just tackling specific or new problems,” IBM CEO Arvind Krishna said in a statement.
As for guidance, IBM called for full-year free cash flow to increase by more than $1 billion. In July, forecasts called for an increase of about $1 billion. IBM still forecasts constant currency revenue growth for 2026 of between 4% and 5%.
In the third quarter, IBM generated $7.80 billion in software revenue, up 8% and beating the consensus of $7.66 billion among analysts surveyed by StreetAccount.
Consulting revenue, at $5.34 billion, was flat and just below StreetAccount’s consensus of $5.37 billion.
“AI is increasingly integrated into the broader transformations our clients are undertaking, accounting for approximately 30% of our consulting revenue in the quarter and 35% of our backlog,” IBM Chief Financial Officer Jim Kavanaugh said on a conference call with analysts.
The consulting unit’s gross margin of 27.4% narrowed from 28.9% in the second quarter.
“We have reinvested productivity gains into digital assets, accelerating our transition to a services-as-software model to capture the growing AI opportunity,” Kavanaugh said.
Infrastructure revenues totaled $3.70 billion. That’s up 4% and above StreetAccount’s consensus of $3.57 billion.
The company’s adjusted gross margin, at 58.5%, was below the StreetAccount consensus of 59.1%.
During the quarter, IBM announced that it had agreed to acquire Boeing and General Motors’ HRL Laboratories, formerly known as the research division of Hughes Aircraft, for an undisclosed amount.
As of Wednesday’s close, IBM stock fell 15%, while the S&P 500 index gained 13%.
“I think the current estimates for the year are about $32 billion in revenue,” Kavanaugh said. “We’re comfortable with that $32 billion in revenue.”
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