- IBM reported third-quarter revenue of $17.1 billion, surpassing analyst expectations of $16.83 billion
- The company recovered roughly two-thirds of delayed mainframe and related software deals
- IBM raised its full-year free cash flow outlook by more than $1 billion year-over-year
International Business Machines Corp. (IBM) added 3% in after-hours trading Wednesday after posting third-quarter revenue of $17.1 billion, beating Wall Street estimates on strong software growth and a rebound in mainframe sales. Earnings came in at $2.95 per share, topping the average analyst forecast of $2.86 per share.
The company’s Software division grew 8.3% to $7.8 billion, outpacing consensus projections of $7.64 billion. Growth was anchored by cloud offerings including Red Hat, which rose 11%, and Data software, which surged 19%.
Meanwhile, IBM‘s Infrastructure division posted a 4% revenue increase to $3.7 billion, ahead of Wall Street estimates. Chief Financial Officer Jim Kavanaugh noted that IBM successfully closed about two-thirds of the mainframe and tied software agreements that slipped out of earlier quarters.
Clients had temporarily shifted IT budgets toward specialized AI hardware earlier in the year, delaying enterprise server purchases. However, executive leadership signaled that core infrastructure spending has begun normalizing.
“Our clients are now deploying Super Intelligence in ways that transform entire operating models, instead of simply addressing narrow or novel problems,” Chief Executive Officer Arvind Krishna said in a statement.
IBM reaffirmed its projection for full-year revenue growth of 4% to 5% at constant currency. The company now expects 2026 free cash flow to increase by over $1 billion year-over-year, according to reports.
Through the first nine months of the year, IBM generated $7.8 billion in free cash flow and returned $1.6 billion to shareholders via dividends during the third quarter. The company ended the quarter with $11.1 billion in cash and marketable securities.
Strategic investments remained a priority, with $11.4 billion deployed toward corporate acquisitions so far in 2026 as IBM continues building out its cloud, automation, and data capabilities. Retail sentiment on Stocktwits was bullish with high message volumes.
IBM stock has lost 17% year-to-date.
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