Arvind Krishna, chief executive officer of International Business Machines Corp. (IBM), speaks during an executive order signing in the Oval Office of the White House in Washington, DC, US, on Monday, June 22, 2026.
Bonnie Cash | Bloomberg | Getty Images
IBM shares slipped in extended trading on Wednesday after the technology vendor reported better-than-predicted third-quarter results.
Here’s how the company performed relative to LSEG consensus:
- Earnings: $2.95 adjusted vs. $2.86 expected
- Revenue: $17.10 billion vs. $16.82 billion expected
IBM’s revenue grew about 5% from a year ago, 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 earnings exclude acquisition-related adjustments.
“Our clients are now deploying ‘Super Intelligence’ in ways that transform entire operating models, instead of simply addressing narrow or novel problems,” IBM CEO Arvind Krishna was quoted as saying in a statement.
With respect to guidance, IBM called for full-year free cash flow to increase by more than $1 billion. The forecast as of July was a bump of approximately $1 billion. IBM still sees 2026 constant-currency revenue growth between 4% and 5%.
In the third quarter, IBM generated $7.80 billion in software revenue, growing 8% and topping the $7.66 billion consensus among analysts polled by StreetAccount.
Consulting revenue, at $5.34 billion, was flat and just below StreetAccount’s $5.37 billion consensus.
“AI is increasingly embedded in broader transformations our clients are undertaking, representing about 30% of our consulting revenue in the quarter and 35% of our backlog,” Jim Kavanaugh, IBM’s finance chief, said on a conference call with analysts.
The consulting unit’s 27.4% gross margin narrowed from 28.9% in the second quarter.
“We reinvested productivity gains into digital assets, accelerating our transition towards a services as software model to capture the growing AI opportunity,” Kavanaugh said.
Infrastructure revenue came to $3.70 billion. That was up 4% and higher than the $3.57 billion consensus from StreetAccount.
The company’s adjusted gross margin, at 58.5%, was narrower than the StreetAccount consensus of 59.1%.
During the quarter, IBM said it agreed to buy Boeing and General Motors’ HRL Laboratories, formerly known as Hughes Aircraft’s research division, for an undisclosed sum.
As of Wednesday’s close, IBM stock has come down 15%, while the S&P 500 index has gained 13%.
“I think the current street estimates for the year are about $32 billion of revenue,” Kavanaugh said. “We feel comfortable with that $32 billion of revenue.”
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