International Business Machines Corp

IBM reported Q3 2026 revenue of $17.1 billion, up 5% (6% at constant currency), led by Software (+8%) and Infrastructure (+4%), with Consulting flat. GAAP diluted EPS from continuing operations was $2.31 versus $1.84, and operating (non-GAAP) EPS was $2.95 versus $2.65. IBM kept its full-year constant currency revenue growth outlook at 4-5% and raised its free cash flow outlook to growth of more than $1 billion year over year. It declared a regular quarterly dividend of $1.69 per share.

1. 1.IBM raised its full-year free cash flow outlook to an increase of more than $1 billion year over year; the release says only that it 'now expects' this and gives no prior figure.
2. 2.Q3 free cash flow was $3.0 billion versus $2.4 billion a year earlier, and nine-month free cash flow was $7.8 billion versus $7.2 billion.
3. 3.The GAAP effective tax rate fell to 11.9% from 28.2%, so GAAP income from continuing operations rose 26% to $2.2 billion on pre-tax income up only 3%.
4. 4.Software revenue rose 8% to $7.8 billion and segment profit margin improved to 35.0% from 32.9%; Data grew 19% and Hybrid Cloud (Red Hat) grew 11%, while Automation fell 3%.
5. 5.Infrastructure revenue rose 4% to $3.7 billion, with Distributed Infrastructure up 31% and IBM Z down 20%.
6. 6.Acquisitions totaled $11.4 billion year to date, lifting goodwill to $74.9 billion from $67.7 billion and total debt to $63.8 billion, up $2.6 billion, while cash and marketable securities fell $3.4 billion to $11.1 billion.

1. 1.Debt rose to $63.8 billion and cash and marketable securities fell to $11.1 billion after $11.4 billion of acquisitions, which raises leverage and integration risk.
2. 2.Goodwill of $74.9 billion and intangibles of $13.6 billion are exposed to impairment risk, and acquisition-related charges are growing (Q3 pre-tax adjustment of $707 million vs $590 million).
3. 3.Consulting revenue was flat (+2% at constant currency), segment margin slipped to 12.2% from 12.9%, and gross margin fell to 27.4% from 29.3%.
4. 4.IBM Z revenue fell 20%, and Infrastructure Support and Automation also declined, which creates product-cycle dependence.
5. 5.GAAP pre-tax margin fell 30 basis points to 14.6% and gross margin fell 50 basis points, as R&D rose to $2.4 billion from $2.1 billion, and the low 11.9% tax rate boosted GAAP EPS.
6. 6.The forward-looking statements flag a downturn in client spending, AI development and use risks, acquisition integration, cybersecurity, currency and customer financing risks.