After the U.S. stock market closed on Wednesday, IBM (IBM.US) released its financial results for the third quarter of 2026.
Data showed that the company's quarterly revenue came in at $17.103 billion, up 5% year over year, or 6% at constant currency. GAAP net income from continuing operations was $2.199 billion, up 26% year over year, with diluted earnings per share of $2.31, also up 26%. Non-GAAP adjusted net income from continuing operations was $2.812 billion, up 12% year over year, while adjusted earnings per share reached $2.95, up 11%. IBM shares rose more than 2% in after-hours trading.
On profitability, IBM's third-quarter GAAP gross margin was 56.8%, down 0.5 percentage points year over year. Non-GAAP adjusted gross margin was 58.5%, down 0.2 percentage points. Adjusted pre-tax income was $3.295 billion, up roughly 9% year over year, and the adjusted pre-tax margin was 19.3%, up 0.7 percentage points.
Breaking down results by business segment, the software division posted revenue growth of 8% to $7.804 billion, with the Red Hat hybrid cloud business up 11%, the data business up 19%, and the transaction processing business up 9%, although automation revenue fell 3%. Consulting revenue was $5.335 billion, essentially flat compared with the same period a year earlier. Infrastructure revenue rose 4% year over year to $3.707 billion, with distributed infrastructure up 31%, while the IBM Z mainframe business declined 20%.
On cash flow, IBM's third-quarter operating cash flow was $4.025 billion, an increase of about $900 million year over year. Free cash flow was $3.027 billion, up about $700 million. Over the first nine months of the year, the company's cumulative free cash flow reached $7.787 billion. As of the end of the third quarter, IBM held $11.1 billion in cash, restricted cash and marketable securities, with total debt of $63.8 billion.
Looking ahead to the full year of 2026, IBM maintained its forecast of 4% to 5% revenue growth at constant currency, and said it expects currency movements to have a broadly neutral impact on full-year revenue growth. At the same time, the company raised its free cash flow outlook, projecting that full-year free cash flow will increase by more than $1 billion compared with 2025. IBM Chairman and Chief Executive Officer Arvind Krishna said customers are gradually applying superintelligence technology to transform their entire operating models, rather than using it only to solve isolated problems. The company will continue to help customers improve operating efficiency and drive business growth through technology and professional services.
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