Amherst, New York, October 21st / PRNewswire / -- IBM (New York Stock Exchange ticker: IBM) announced its financial results for the third quarter of 2026 today.

IBM Chairman, President, and CEO Arvind Krishna stated: "The solid execution throughout the quarter has driven accelerated revenue growth and strong free cash flow. Our customers are now deploying technology in an ultra-intelligent manner (Super Intelligence), which transforms entire operational models, rather than just solving narrow or novel problems. The technology and professional capabilities of IBM are helping various organizations achieve growth and serve customers at an unprecedented speed, precision, and efficiency."

Krishna also states: 'For the whole year, we continue to expect revenue growth calculated at a fixed exchange rate to be between 4% and 5%; currently, we anticipate that free cash flow will increase by more than $1 billion year-on-year.'

Key Points of the Third Quarter

• Revenues amounted to $17.1 billion, a year-on-year increase of 5%, and a 6% increase when calculated using a fixed exchange rate.
• Software revenue increased by 8%, and when calculated using a fixed exchange rate, it increased by 9%.
• Consulting revenue remained flat, with a 2% increase when calculated using a fixed exchange rate.
• Infrastructure revenue increased by 4%, and when calculated using a fixed exchange rate, it increased by 5%.
• Gross profit margin: GAAP is 56.8%, a decrease of 50 basis points; operating (non-GAAP) is 58.5%, a decrease of 20 basis points.
• Pre-tax profit margin: GAAP is 14.6%, down 30 basis points; operating (non-GAAP) is 19.3%, up 70 basis points.
• As of now, the net cash flow from operating activities is $11.8 billion, and the free cash flow is $7.8 billion.

IBM, Senior Vice President and Chief Financial Officer, James Kavanaugh stated: "The demand for our product portfolio, combined with strong operational execution, has driven accelerated revenue growth and a solid expansion in operating pre-tax profit margins this quarter. Just as we help customers extract value from their operations through superintelligence, we are also creating significant returns internally at IBM through productivity initiatives. This approach has fueled the growth of profits and free cash flow, allowing us to return value to shareholders through dividends while continuing to invest in our business."

Third Quarter Segment Performance

• Software: Revenues of $7.8 billion, a year-on-year increase of 8%, and a 9% increase when calculated using a fixed exchange rate.
• Hybrid cloud ( Red Hat ) grew by 11%
• Automated decline of 3%
• Data growth of 19%, an increase of 20% when calculated using a fixed exchange rate.
• Transaction processing increased by 9%, and when calculated at a fixed exchange rate, it increased by 10%.
• Consultation: Revenue of $5.3 billion, flat, with a 2% increase when calculated using a fixed exchange rate.
• Strategic and technical growth of 2%, with a 4% increase calculated at a fixed exchange rate.
• Intelligent operations decreased by 2%, remaining flat when calculated at a fixed exchange rate.
• Infrastructure: Revenue of $3.7 billion, a year-on-year increase of 4%, and a 5% increase when calculated using a fixed exchange rate.
• Hybrid infrastructure grew by 8%, and when calculated using a fixed exchange rate, it grew by 9%.
• IBM Z decreased by 20%, and when calculated using a fixed exchange rate, it decreased by 19%.
• Distributed infrastructure grew by 31%, and when calculated at a fixed exchange rate, it grew by 32%.
• Infrastructure support has decreased by 3%, and when calculated using a fixed exchange rate, it has decreased by 2%.
• Financing business: Revenue of $200 million, a decrease of 4%, and a decrease of 3% when calculated using the fixed exchange rate.

Cash Flow and Balance Sheet

In the third quarter, the net cash flow generated from the company's operating activities was $4 billion, an increase of $900 million year-on-year. The free cash flow was $3 billion, an increase of $700 million year-on-year. The company distributed $1.6 billion in dividends to shareholders in the third quarter.

In the first nine months of this year, the company's operating activities generated a net cash flow of $11.8 billion, an increase of $2.6 billion compared to the same period last year. IBM Free cash flow was $7.8 billion, an increase of $600 million compared to the same period last year.

As of the end of the third quarter, IBM held $11.1 billion in cash, restricted cash, and marketable securities, which is a decrease of $3.4 billion compared to the end of 2025. The company invested $11.4 billion in mergers and acquisitions this year. Including the $12.7 billion in financing debt of IBM, the total debt amount is $63.8 billion, an increase of $2.6 billion since the beginning of the year.

Full-year expectations for 2026

• Revenues: The company continues to expect revenue growth for the year to be between 4% and 5% when calculated using a fixed exchange rate. Based on the current foreign exchange rates, the impact of exchange rate factors is expected to be neutral on the annual growth.
• Free Cash Flow: The company currently expects its annual free cash flow to increase by more than $1 billion year-over-year.

Dividend Announcement

The Board of Directors has approved the distribution of a quarterly cash dividend of $1.69 per common share, with the record date being November 10, 2026. With the dividend payment on December 10, 2026, IBM will achieve consecutive annual quarterly dividend distributions for the first time since 1916.

Forward-looking and Cautionary Statements

In addition to the historical information and discussions contained in this document, the statements in this press release may constitute forward-looking statements as defined by 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 various risks, uncertainties, and other factors that could lead to significant differences between actual results and those stated, including but not limited to: economic environment and customer spending budget declines; failure of the company's innovation initiatives; damage to the company's reputation; risks associated with investments in growth opportunities; the company's intellectual property portfolio failing to protect against competitive products and the inability to obtain necessary licenses; the company's ability to successfully manage mergers, acquisitions, alliances, and divestitures, including integration challenges, failure to achieve objectives, assumption or retention of liabilities, and higher debt levels; fluctuations in financial results; impacts of local laws, economics, politics, health, and other conditions; the company's inability to achieve growth and productivity targets; ineffective internal controls; the company's use of accounting estimates; impairment of goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its dependence on critical skills; impacts from relationships with key suppliers; quality issues with products and services; developments and uses of artificial intelligence, including the company's increase in AI solutions and use of AI technology; impacts related to business with government customers; dependence on third-party distribution channels and ecosystems; considerations regarding cybersecurity and data protection; adverse effects of climate change and other environmental matters; tax matters; risks of legal proceedings and investigations; the company's pension plans; exchange rate fluctuations and customer financing risks; changes in market liquidity and the impact on accounts receivable due to customer credit risks; risk factors related to IBM securities; and other risks, uncertainties, and factors discussed in the company's filings with the U.S. Securities and Exchange Commission, such as the Form 10-Q, Form 10-K, and other documents, or materials referenced therein.

Any forward-looking statements in this press release are only valid as of the date they are made. Except as required by law, the company assumes no obligation to update or revise any such forward-looking statements.

The information presented in this press release

In order to provide investors with more information regarding the company's results calculated in accordance with generally accepted accounting principles ( GAAP ), the company has also disclosed the following non- GAAP information in this press release, which management believes will be helpful to investors:

• Adjust according to a fixed exchange rate;
• Disclose operating (non-GAAP) earnings per share and related income statement items;
• Free cash flow;
• Net cash flow from operating activities after deducting IBM financing receivables;
• After adjustment, EBITDA;
• Adjusted EBITDA profit margin.

The reasons why management uses these non-GAAP indicators are outlined in Attachment 99.2 of the 8-K form submitted to the U.S. Securities and Exchange Commission today, which includes this press release.

Teleconference and online live broadcast

IBM The regular quarterly financial report conference is scheduled to begin at 5:00 PM Eastern Time today. Live webcast can be accessed through the following links: https :// www.ibm.com / investor / events / earnings-3q26. Presentation slides will be available shortly before the live webcast begins.

The following are the financial results (due to rounding, some totals may not be exactly consistent; the percentages listed are calculated based on the underlying integer amounts).

Contact person: IBM

Tim Davidson, 914-844-7847

Erin McElwee, 347-920-6825