IBM (IBM) · Software
IBM Q2 2026 earnings: summary, key numbers & outlook
Results filed 22 Jul 2026 · Quarter ended 30 Jun 2026
Press release ↗Investor relations ↗
Summaries and transcripts are machine-generated and can contain errors.
In brief
IBM reported second-quarter 2026 GAAP revenue of $17.2B, up 1%, with diluted EPS of $2.27 and operating (non-GAAP) EPS of $2.93, and now expects full-year constant currency revenue growth in the range of four-to-five percent.
IBM's second-quarter revenue was $17.2 billion, up 1% from a year ago. Software grew 5% to $7.8 billion, led by Data (up 19%) and Red Hat (up 11%). Consulting was flat and Infrastructure fell 7%, as IBM Z dropped 42% while Distributed Infrastructure rose 37%. GAAP diluted EPS was $2.27, down 2%, while operating (non-GAAP) EPS rose 5% to $2.93. Free cash flow was $2.5 billion, down $0.3 billion.
IBM now expects full-year constant currency revenue growth of four-to-five percent and still expects free cash flow to rise by about $1 billion. It also expects improved pre-tax income margin expansion. The CFO acknowledged revenue headwinds late in the second quarter. The tension is that IBM is investing in sales coverage, AI talent and quantum while revenue growth is slim and mainframe sales are sharply lower. Acquisitions of $10.5 billion this year have also cut cash and raised goodwill.
Key numbers
- Revenue (GAAP, continuing operations) · GAAP
- $17.2B
- Net income · GAAP
- $2.2B
- Diluted EPS, continuing operations · GAAP
- $2.27
- Operating (non-GAAP) diluted EPS · non-GAAP
- $2.93
- GAAP gross profit margin · GAAP
- 57.7%
- Net cash from operating activities · GAAP
- $2.6 billion
- Free cash flow · non-GAAP
- $2.5 billion
- Adjusted EBITDA margin · non-GAAP
- 27.8%
up 1% from a year ago
down from $2,194 million a year ago
down 2% from a year ago
up 5% from a year ago
down 1.0 points from a year ago
up $0.9 billion year to year
down $0.3 billion year to year
up 0.2 points from a year ago
| Segment or metric | Value | Change |
|---|---|---|
| Software | $7.8 billion | up 5 percent |
| Consulting | $5.3 billion | flat, up 1 percent at constant currency |
| Infrastructure | $3.8 billion | down 7 percent |
| Financing | $0.2 billion | up 12 percent, up 11 percent at constant currency |
| Data (Software) | 19 percent | up 19 percent, up 18 percent at constant currency |
| Hybrid Cloud (Red Hat) | 11 percent | up 11 percent |
| Distributed Infrastructure | 37 percent | up 37 percent |
| IBM Z | 42 percent | down 42 percent |
Where each number comes from
- Revenue (GAAP, continuing operations): “GAAP from Continuing Operations | $17.2B | $9.9B | 57.7% | $2.5B | 14.4% | $2.2B | $2.27 Year/Year | 1%”
- Net income: “INCOME FROM CONTINUING OPERATIONS | $2,166 | $2,193 | $3,382 | $3,248 DISCONTINUED OPERATIONS Income/(loss) from discontinued operations, net of taxes | (1) | 1 | (1) | 1 NET INCOME | $2,165 | $2,194”
- Diluted EPS, continuing operations: “GAAP from Continuing Operations | $17.2B | $9.9B | 57.7% | $2.5B | 14.4% | $2.2B | $2.27 Year/Year | 1% | (1)% | (1.0) | Pts | (5)% | (0.9) | Pts | (1)% | (2)%”
- Operating (non-GAAP) diluted EPS: “Diluted earnings per share: continuing operations | $2.27 | $0.58 | $0.08 | $0.00 | $2.93 Three Months Ended June 30, 2025”
- GAAP gross profit margin: “GROSS PROFIT | 9,907 | 9,977 | 18,857 | 18,008 GROSS PROFIT MARGIN Software | 82.6% | 83.9% | 82.7% | 83.7% Consulting | 28.9% | 27.5% | 28.2% | 27.4% Infrastructure | 58.4% | 61.5% | 57.7%”
- Net cash from operating activities: “the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year to year. IBM’s free cash flow was $2.5 billion, down $0.3 billion year to year.”
- Free cash flow: “the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year to year. IBM’s free cash flow was $2.5 billion, down $0.3 billion year to year.”
- Adjusted EBITDA margin: “GAAP net income margin | 12.6% | 12.9% | (0.3)pts | 10.2% | 10.3% | (0.1)pts Adjusted EBITDA margin | 27.8% | 27.6% | 0.2pts | 26.5% | 25.7% | 0.8pts”
- Software: “Software — revenues of $7.8 billion, up 5 percent: –Hybrid Cloud (Red Hat) up 11 percent –Automation up 4 percent, up 3 percent at constant currency”
- Consulting: “Consulting — revenues of $5.3 billion, flat, up 1 percent at constant currency: –Strategy and Technology flat, up 1 percent at constant currency”
- Infrastructure: “Infrastructure — revenues of $3.8 billion, down 7 percent: –Hybrid Infrastructure down 10 percent •IBM Z down 42 percent”
- Financing: “Financing — revenues of $0.2 billion, up 12 percent, up 11 percent at constant currency Cash Flow and Balance Sheet”
- Data (Software): “–Data up 19 percent, up 18 percent at constant currency –Transaction Processing down 8 percent, down 9 percent at constant currency”
- Hybrid Cloud (Red Hat): “Software — revenues of $7.8 billion, up 5 percent: –Hybrid Cloud (Red Hat) up 11 percent –Automation up 4 percent”
- Distributed Infrastructure: “•IBM Z down 42 percent •Distributed Infrastructure up 37 percent –Infrastructure Support down 1 percent”
- IBM Z: “–Hybrid Infrastructure down 10 percent •IBM Z down 42 percent •Distributed Infrastructure up 37 percent”
Copied from the press release ↗ and other documents in the SEC filing ↗. A figure is published only if its sentence is in the filing.
| From the filing | Q2 2026 | vs year ago | vs last quarter |
|---|---|---|---|
| Revenue | $17.2B | +1.1% | +7.8% |
| Net income | $2.2B | −1.3% | +78.0% |
| Diluted EPS | $2.27 | −1.7% | +77.3% |
| Free cash flow | $2.4B | +58.8% | −52.0% |
| Gross margin | 57.7% | −1.1 pts | +1.5 pts |
Calculated by code from XBRL, not by the model.
Outlook
| Metric | Period | Outlook |
|---|---|---|
| Free cash flow increase year over year | full-year 2026 | about $1 billion |
Key takeaways
Revenue growth was only 1% in the quarter
GAAP revenue was $17.2B, up 1%, and the CFO cited revenue headwinds late in the second quarter. Operating (non-GAAP) revenue growth was 0%.
Software grew 5% led by Data and Red Hat
Software revenue was $7.8 billion, with Data up 19 percent and Hybrid Cloud (Red Hat) up 11 percent. Transaction Processing fell 8 percent.
IBM Z drop dragged Infrastructure down 7%
IBM Z was down 42 percent, while Distributed Infrastructure was up 37 percent. Power and Storage built an order backlog of nearly $500 million.
Operating EPS rose 5% while GAAP EPS fell
Operating (non-GAAP) EPS was $2.93, up 5%, while GAAP diluted EPS was $2.27, down 2%. Pre-tax income margin was 14.4% GAAP and 19.2% operating.
Full-year view: four-to-five percent growth, FCF up $1 billion
IBM now expects constant currency revenue growth in the range of four-to-five percent and about $1 billion of higher free cash flow. It also expects improved pre-tax income margin expansion.
Charts
Fourth quarter worked out from the annual figure.
Data
| Q4 2024 | $17.6B * |
| Q1 2025 | $14.5B |
| Q2 2025 | $17.0B |
| Q3 2025 | $16.3B |
| Q4 2025 | $19.7B * |
| Q1 2026 | $15.9B |
| Q2 2026 | $17.2B |
| Q3 2026 | $17.1B |
Data
| Q1 2025 | $1.12 |
| Q2 2025 | $2.31 |
| Q3 2025 | $1.84 |
| Q1 2026 | $1.28 |
| Q2 2026 | $2.27 |
| Q3 2026 | $2.30 |
Fourth-quarter EPS appears once the press release is read; filings report it only for the full year.
Data
| Q4 2024 | $4.0B |
| Q1 2025 | $4.1B |
| Q2 2025 | $1.5B |
| Q3 2025 | $2.8B |
| Q4 2025 | $3.7B |
| Q1 2026 | $4.9B |
| Q2 2026 | $2.4B |
| Q3 2026 | $3.7B |
Operating cash flow minus capital expenditure, from cash flow statements.
Questions
What were IBM's second-quarter 2026 revenue and earnings?
GAAP revenue was $17.2B, up 1%, with diluted EPS of $2.27 and net income of $2.2B. Operating (non-GAAP) EPS was $2.93, up 5%.
Which IBM segments grew and which shrank?
Software grew 5% to $7.8 billion and Financing rose 12%, while Consulting was flat. Infrastructure fell 7% to $3.8 billion as IBM Z dropped 42 percent.
What is IBM's full-year 2026 outlook?
IBM expects full-year constant currency revenue growth in the range of four-to-five percent, with currency neutral to growth at current rates. It continues to expect free cash flow to increase by about $1 billion.
How much free cash flow did IBM generate?
Second-quarter free cash flow was $2.5 billion, down $0.3 billion year to year. For the first six months it was $4.8 billion, flat year to year.
What is IBM's dividend and balance sheet position?
The board approved a quarterly dividend of $1.69 per share. IBM ended the quarter with $8.2 billion of cash, restricted cash and marketable securities, and total debt of $62.0 billion.
Documents
SEC filing