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International Business Machines posted third-quarter revenue of $17.1 billion, up 5% or 6% in constant currency, beating Wall Street estimates as software sales accelerated. Chief Executive Officer Arvind Krishna highlighted enterprise demand for advanced capabilities, while Chief Financial Officer Jim Kavanaugh raised the company’s full-year free cash flow growth forecast.
International Business Machines reported third-quarter financial results that topped analyst expectations across both earnings and revenue, offering a measure of relief following a turbulent summer. The technology vendor posted adjusted earnings of $2.95 per share, coming in ahead of the $2.86 LSEG consensus estimate. Total revenue rose to $17.10 billion, edging past the $16.82 billion Wall Street anticipated and marking a 5% increase from a year earlier, or 6% on a constant-currency basis.
Net income reached $2.19 billion, or $2.30 per share, climbing from $1.74 billion, or $1.84 per share, in the same period last year. Operating pre-tax margin expanded by 70 basis points to 19.3%, reflecting operational discipline that management credited for fueling cash flow generation even as certain business segments remained flat. Market metrics indicate a valuation of $219.35 billion for IBM’s market capitalization, alongside a 21.47 price-to-earnings ratio and a peak 52-week price point of $332.46. Following Wednesday’s market close, shares of IBM experienced a 15% decrease, whereas the S&P 500 index posted a 13% increase.
Software Sales Drive Revenue Growth
Software sales served as the primary engine for the quarter, generating $7.80 billion in revenue and growing 8% year-over-year, topping the $7.66 billion consensus among analysts polled by StreetAccount. High-value ARR grew high single digits to $25 billion. Infrastructure revenue came to $3.70 billion, up 4% and higher than the $3.57 billion consensus from StreetAccount.
The transactional software business bounced back with 10% growth, reversing a double-digit decline from the previous quarter. Executives attributed part of the recovery to the closing of delayed deals that had slipped past the second-quarter reporting window, pointing to transaction processing revenue that grew 10% after declining double digits in Q2. International Business Machines Chief Executive Officer Arvind Krishna began the Q3 2026 earnings call by emphasizing that over two-thirds of the previously troubled mainframe agreements successfully finalized last quarter, delivering a message of vindication that the software weakness troubling investors three months prior stemmed from timing rather than a drop in demand.
About a quarter of it is the slip deals with regards to overall software acceleration, and about three-quarters of it is net new business that we are capturing.
Jim Kavanaugh, Chief Financial Officer, via BigGo Finance
Clients Deploy Artificial Intelligence to Transform Operating Models
Management explained that productivity gains were reinvested into digital assets, accelerating the transition towards a services-as-software model to capture the growing artificial intelligence opportunity.
Our clients are now deploying ‘Super Intelligence’ in ways that transform entire operating models, instead of simply addressing narrow or novel problems.
Arvind Krishna, Chief Executive Officer, via CNBC
IBM Raises Financial Outlook as Free Cash Flow Grows
Strong operational execution prompted IBM to raise its financial outlook for the remainder of the year. Year-to-date net cash from operating activities reached $11.8 billion, with free cash flow totaling $3.0 billion in the quarter, up $0.7 billion year-to-year.
At the same time, International Business Machines still sees 2026 constant-currency revenue growth between 4% and 5%. James Kavanaugh, International Business Machines senior vice president and chief financial officer, noted comfort with current street estimates for the year of about $32 billion of revenue.
IBM Shares Slip After Third-Quarter Results
Despite beating expectations and raising cash flow forecasts, IBM shares slipped in after-hours trading on Wednesday after the technology vendor reported better-than-predicted third-quarter results, giving up earlier gains from the regular trading session. Investors continue to navigate a choppy period following the sharp pullback in July triggered by the second-quarter mainframe slump.
Ranking among the major competitors in the IT services and software sectors alongside Accenture and other worldwide system integrators, International Business Machines has a market capitalization of $236.91 billion. As international business operations modernize, the company’s hybrid cloud business and early initiatives continue to shape sentiment across the enterprise technology sector.
