IBM RELEASES SECOND-QUARTER RESULTS

IBM RELEASES SECOND-QUARTER RESULTS - Jul 22, 2026

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IBM RELEASES SECOND-QUARTER RESULTS

Company provides updated full-year expectations

Jul 22, 2026

ARMONK, N.Y., July 22, 2026 / PRNewswire / -- IBM (NYSE: IBM ) today announced second-quarter 2026 earnings results.

"We are confident in IBM's strategy and portfolio, and in our ability to capture growth opportunities ahead. We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio - across software, infrastructure, and consulting - is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future," said Arvind Krishna, IBM chairman, president and chief executive officer. "In addition, we are taking action to accelerate our revenue growth and profitability, driving productivity across the company with AI and automation, and heavily investing in commercializing innovation at speed and scale. We now expect constant currency revenue growth in the range of four-to-five percent, and we continue to expect free cash flow to increase by about $1 billion year-over-year for the full year."

Full-Year 2026 Expectations

Revenue: The company now expects full-year constant currency revenue growth in the range of four-to-five percent. At current foreign exchange rates, currency is expected to be neutral to growth for the year

Free cash flow: The company continues to expect full-year free cash flow to increase by about $1 billion year-over-year

Operational Focus Areas

High-Growth Portfolio: Areas of IBM's software business that help clients manage, deploy and build AI-ready solutions, like Red Hat, the watsonx portfolio, HashiCorp, and Confluent continue to deliver strong performance. Within Distributed Infrastructure, Power and Storage grew at a record pace in the second quarter, now having built up an order backlog of nearly $500 million. Together, these offerings closely map to where client demand is strongest. To capture these growth opportunities, IBM is accelerating changes to its go-to-market model by expanding sales coverage across thousands of additional clients where there is significant opportunity. As AI adoption moves from experimentation to enterprise-scale deployment, the company is also investing in more specialized technical and client-facing talent, including Forward Deployed Engineers.

Rapid Innovation at Scale: IBM is acting decisively to capture new opportunities as they arise. Lightwell, a new capability to address open source security vulnerabilities, leverages IBM and Red Hat's trust within the open source community, unique approach to AI, and global scale. In the first two weeks of availability, Lightwell has already made more than 7,500 open source patches available to help clients secure vulnerabilities. Additionally, quantum computing continues to be an investment priority for the company. In May, with the U.S. Department of Commerce, IBM announced a letter of intent to build Anderon, the world's first pure-play quantum wafer foundry. IBM will invest more than $10 billion in quantum over the next five years, and remains on track to deliver the first large-scale fault-tolerant quantum computer by 2029.

Productivity Enables Investment and Value: IBM is accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain. These efforts help enhance margin and free cash flow, and strengthen the company's ability to capture significant growth opportunities. The company now expects improved pre-tax income margin expansion for the full year.

"Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow," said James Kavanaugh, IBM senior vice president and chief financial officer. "In a quarter like this, it is critical that our financial and operational discipline remains strong and that we continue to invest for growth while returning value to shareholders through our dividend."

SECOND - QUARTER 2026 INCOME STATEMENT SUMMARY

Revenue

Gross

Profit

Gross

Profit

Margin

Pre-tax

Income

Pre-tax

Income

Margin

Net

Income

Diluted

Earnings

Per Share

GAAP from

Continuing

Operations

$ 17.2 B

$ 9.9 B

57.7

%

$ 2.5 B

14.4

%

$ 2.2 B

$ 2.27

Year/Year

1

%

(1)

%

(1.0)

Pts

(5)

%

(0.9)

Pts

(1)

%

(2)

%

Operating

(Non-GAAP)

$ 10.2 B

59.4

%

$ 3.3 B

19.2

%

$ 2.8 B

$ 2.93

Year/Year

0

%

(0.7)

Pts

3

%

0.3

Pts

5

%

5

%

Segment Results for Second Quarter

Software — revenues of $7.8 billion, up 5 percent:

• Hybrid Cloud (Red Hat) up 11 percent

• Automation up 4 percent, up 3 percent at constant currency

• Data up 19 percent, up 18 percent at constant currency

• Transaction Processing down 8 percent, down 9 percent at constant currency

Consulting — revenues of $5.3 billion, flat, up 1 percent at constant currency:

• Strategy and Technology flat, up 1 percent at constant currency

• Intelligent Operations flat, up 1 percent at constant currency

Infrastructure — revenues of $3.8 billion, down 7 percent:

• Hybrid Infrastructure down 10 percent

-- IBM Z down 42 percent

-- Distributed Infrastructure up 37 percent

• Infrastructure Support down 1 percent

Financing — revenues of $0.2 billion, up 12 percent, up 11 percent at constant currency

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year to year. IBM's free cash flow was $2.5 billion, down $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the second quarter.

For the first six months of the year, the company generated net cash from operating activities of $7.8 billion, up $1.7 billion year to year. IBM's free cash flow was $4.8 billion, flat year to year.

IBM ended the second quarter with $8.2 billion of cash, restricted cash and marketable securities, down $6.3 billion from year-end 2025. The company invested $10.5 billion in acquisitions this year. Debt, including IBM Financing debt of $13.0 billion, totaled $62.0 billion, up $0.7 billion year to date.

Dividend Declaration

The IBM...