IBM (IBM) Q1 2026 earnings summary

Executive summary

• Revenue for Q1 2026 was $15.9 billion, up 9.5% year-over-year (6%–6.1% at constant currency), with strong margin expansion and double-digit growth in free cash flow and profit, driven by AI adoption and strategic execution.

• Software and Infrastructure segments delivered double-digit growth, with Software revenue at $7.1 billion (+11% reported, +8% constant currency), Infrastructure up 15% (+12% constant currency), and IBM Z up 51%.

• Consulting revenue grew 4% (1% at constant currency), with signings up 6% and generative AI now 30% of backlog.

• AI adoption is accelerating across all segments, with significant client wins, new AI-driven product launches (including watsonx and IBM Bob), and strategic collaborations with Nvidia and Arm.

• The acquisition of Confluent, completed in March 2026, is enhancing AI and data capabilities and contributed to Data revenue growth.

Financial highlights

• Revenue reached $15.9 billion, up 6% year-over-year at constant currency; free cash flow was $2.2 billion, up 13% year-over-year, marking the highest Q1 free cash flow in a decade.

• Adjusted EBITDA grew 17% to $4.0 billion; diluted operating EPS increased 19% to $1.91; net income from continuing operations was $1.2 billion, up 15.3%.

• Gross profit margin (GAAP) rose to 56.2%, operating margin (non-GAAP) at 57.7%, both up over 1 point year-over-year.

• ARR for software reached $24.6 billion, up 10% year-over-year; Data revenue up 16%, Red Hat up 10%, Automation up 7%.

• Segment profit margins: Infrastructure up 720 basis points, Software up 60 basis points; Consulting margin declined modestly.

Outlook and guidance

• Confident in delivering constant currency revenue growth of 5%+ and free cash flow growth of about $1 billion for 2026.

• Software business expected to grow 10%+ for the year; Consulting revenue growth to accelerate to low to mid-single digits.

• Infrastructure revenue expected to be down low single digits for the year, despite strong Z17 cycle.

• Operating pre-tax margin expansion of about 1 point expected, absorbing $600 million dilution from Confluent.

• Quarterly dividend increased to $1.69 per share, marking the 31st consecutive annual increase.