IBM (IBM) Q3 2026 earnings summary

Executive summary

• Q3 revenue was $17.1B, up 5% reported and 6% at constant currency; growth accelerated, led by Software and Infrastructure.

• Operating pre-tax margin expanded 70 bps and diluted operating EPS grew 11%.

• 9M free cash flow reached $7.8B, up $0.6B YoY; FY free cash flow growth outlook increased to more than $1B.

• FY constant-currency revenue growth guidance remains 4%–5%.

Financial highlights

• Q3 operating pre-tax income was $3.3B; operating net income was $2.8B, up 12%, and operating diluted EPS was $2.95, up 11%.

• Adjusted EBITDA was $4.9B, up 7%; reported GAAP net income was $2.2B versus $1.7B a year earlier.

• 9M free cash flow, excluding IBM Financing receivables, was $7.8B, up $0.6B YoY; net cash from operations on the same basis was $9.0B.

• Higher Adjusted EBITDA supported 9M free cash flow growth, partly offset by higher CapEx, cash taxes and net interest expense.

Outlook and guidance

• FY 2026 constant-currency revenue growth is expected at 4%–5%; operating pre-tax margin expansion is expected at 100 bps.

• FY free cash flow is expected to increase by more than $1B YoY, driven primarily by Adjusted EBITDA and partly offset by higher CapEx, cash taxes and net interest expense.

• FY Software growth is expected at ~7%–8%, with ~7% as the revised base case; Hybrid Cloud is expected to grow double digits, Data mid-teens and Automation low single digits.

• FY Transaction Processing growth is expected to be flat; Infrastructure growth is expected in the low single digits and Consulting in the low- to mid-single digits.

• Operating tax rate is expected in the mid-teens.