IBM Posts 5% Revenue Growth in Third Quarter, Raises Free Cash Flow Outlook

International Business Machines Corp said in a filing with the Securities and Exchange Commission that third-quarter 2026 revenue rose 5 percent to $17.1 billion, with software and infrastructure leading the gains.

Software revenue climbed 8 percent to $7.8 billion, driven by a 19 percent increase in Data and a 9 percent rise in Transaction Processing. Consulting revenue was flat at $5.3 billion, while Infrastructure revenue grew 4 percent to $3.7 billion, helped by a 31 percent jump in Distributed Infrastructure that offset a 20 percent decline in IBM Z.

Net income rose 26 percent to $2.2 billion, with diluted earnings per share of $2.31 on a GAAP basis and $2.95 on an operating, non-GAAP basis. Pre-tax income margin was 14.6 percent on a GAAP basis, down 30 basis points, while the operating margin expanded 70 basis points to 19.3 percent.

The company generated $4.0 billion in net cash from operating activities during the quarter, up $0.9 billion year over year, and free cash flow of $3.0 billion, up $0.7 billion. For the first nine months of 2026, net cash from operations totaled $11.8 billion and free cash flow reached $7.8 billion. IBM returned $1.6 billion to shareholders in dividends during the quarter and ended the period with $11.1 billion in cash, restricted cash and marketable securities, down $3.4 billion from year-end 2025. The company has invested $11.4 billion in acquisitions so far this year, and total debt stood at $63.8 billion, up $2.6 billion year to date.

Chairman, president and chief executive Arvind Krishna said disciplined execution drove accelerated revenue growth and strong free cash flow, adding that clients are deploying Super Intelligence to transform entire operating models. For the full year, IBM continues to expect constant currency revenue growth of four-to-five percent and now expects free cash flow to increase by more than $1 billion year over year. The board declared a quarterly dividend of $1.69 per share, payable December 10, 2026, to stockholders of record on November 10, 2026.

Finazon · prior-day close, indicative (IEX-derived, not the official close) · Oct 20, 2026