IBM revenue growth speeds up to 5% on software; company lifts free cash flow outlook

IBM's revenue growth picked up in the third quarter, led by its software and infrastructure units, and the company raised its full-year free cash flow forecast.

Revenue rose 5% to $17.1 billion, or 6% at constant currency, according to the earnings release IBM filed with an 8-K on Wednesday. GAAP diluted EPS from continuing operations climbed 26% to $2.31, and operating EPS, a non-GAAP measure, rose 11% to $2.95.

IBM now expects full-year free cash flow to increase by more than $1 billion from last year. It kept its forecast for constant-currency revenue growth of 4% to 5%.

"Disciplined execution throughout the quarter drove accelerated revenue growth and strong free cash flow," Chairman and CEO Arvind Krishna said in the release.

Segment scorecard

Software revenue rose 8% to $7.8 billion. Hybrid Cloud, which includes Red Hat, grew 11%, and Data jumped 19%, while Automation slipped 3%.

Consulting revenue was flat at $5.3 billion, up 2% at constant currency.

Infrastructure revenue rose 4% to $3.7 billion. Distributed Infrastructure surged 31%, offsetting a 20% drop in IBM Z mainframe revenue.

Cash and dividend

Quarterly free cash flow rose $0.7 billion to $3.0 billion, and year-to-date free cash flow reached $7.8 billion. IBM returned $1.6 billion to shareholders through dividends in the quarter and has invested $11.4 billion in acquisitions this year.

Total debt was $63.8 billion, up $2.6 billion since the start of the year. The board declared a quarterly dividend of $1.69 a share, payable Dec. 10 to holders of record on Nov. 10.

By the numbers

• Revenue: $17.1 billion, up 5%
• Operating (non-GAAP) EPS: $2.95, up 11%
• GAAP EPS: $2.31, up 26%
• Software revenue: $7.8 billion, up 8%
• Year-to-date free cash flow: $7.8 billion

Sources

1. International Business Machines Corporation, Form 8-K (Item 2.02) with Exhibit 99.1 earnings release dated Oct. 21, 2026, accession 0000051143-26-000093

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