IBM (IBM) Q1 2026 earnings summary

Executive summary

• Revenue reached $15.9 billion in Q1 2026, up 9.5% year-over-year (6% at constant currency), with double-digit growth in Software and Infrastructure and strong margin expansion.

• Free cash flow rose 13% to $2.2 billion, marking the highest Q1 free cash flow in a decade, and net income increased by double digits.

• AI adoption accelerated across the portfolio, with significant client wins, new AI-driven product launches, and strategic collaborations with Nvidia and Arm.

• The acquisition of Confluent was completed earlier than expected, strengthening the hybrid cloud and AI portfolio.

• Maintained strong liquidity and disciplined capital allocation, returning $1.6 billion to shareholders via dividends.

Financial highlights

• Gross profit margin (GAAP) rose to 56.2%, operating margin (non-GAAP) to 57.7%, and adjusted EBITDA grew 17% to $4.0 billion.

• Diluted operating EPS increased 19% to $1.91; net income margin improved to 11.4%.

• Free cash flow reached $2.2 billion, up $0.3 billion year-over-year.

• Total debt increased to $66.4 billion, with $11.8 billion in cash and marketable securities at quarter-end.

• Net income from continuing operations was $1.2 billion, up 15.3% year-over-year.

Outlook and guidance

• Full-year 2026 guidance reaffirmed for constant currency revenue growth of more than 5% and free cash flow growth of about $1 billion.

• Software revenue expected to grow over 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 IBM Z cycle.

• Operating pre-tax margin expansion of about 1 point expected for the year, absorbing dilution from Confluent.

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