IBM announced first-quarter 2026 earnings results.
"The first quarter was a strong start to the year with broad-based revenue growth across our segments. These results reflect the integrated value of our portfolio and the trust clients put in us to improve their operations. As clients scale use cases, AI continues to be a tailwind for our global business. IBM products and services are helping clients orchestrate, deploy and govern AI across hybrid environments," said Arvind Krishna, IBM chairman, president and chief executive officer. "Given this strong start, we continue to expect more than 5 percent constant currency revenue growth and an increase of about $1 billion in year-over-year free cash flow in 2026."
First-Quarter Highlights
- Revenue
- Revenue of $15.9 billion, up 9 percent, up 6 percent at constant currency
- Software revenue up 11 percent, up 8 percent at constant currency
- Consulting revenue up 4 percent, up 1 percent at constant currency
- Infrastructure revenue up 15 percent, up 12 percent at constant currency - Profit
- Gross Profit Margin: GAAP: 56.2 percent, up 100 basis points; Operating (Non-GAAP):
57.7 percent, up 110 basis points
- Pre-Tax Income Margin: GAAP: 8.7 percent, up 80 basis points; Operating (Non-GAAP):
13.4 percent, up 140 basis points - Cash Flow
- Year to date, net cash from operating activities of $5.2 billion; free cash flow of $2.2 billion
"Our solid revenue growth, portfolio mix and productivity initiatives drove double-digit profit and free cash flow growth in the quarter," said James Kavanaugh, IBM senior vice president and chief financial officer. "The durability of our portfolio combined with our disciplined execution continues to give us the financial flexibility needed to both invest in our business and return value to shareholders through our dividend."
Segment Results for First Quarter
- Software — revenues of $7.1 billion, up 11 percent, up 8 percent at constant currency:
- Hybrid Cloud (Red Hat) up 13 percent, up 10 percent at constant currency
- Automation up 10 percent, up 7 percent at constant currency
- Data up 19 percent, up 16 percent at constant currency
- Transaction Processing up 6 percent, up 2 percent at constant currency - Consulting — revenues of $5.3 billion, up 4 percent, up 1 percent at constant currency:
- Strategy and Technology up 4 percent, up 1 percent at constant currency
- Intelligent Operations up 4 percent, up 1 percent at constant currency - Infrastructure — revenues of $3.3 billion, up 15 percent, up 12 percent at constant currency:
- Hybrid Infrastructure up 28 percent, up 25 percent at constant currency
-- IBM Z up 51 percent, up 48 percent at constant currency
-- Distributed Infrastructure up 17 percent, up 13 percent at constant currency
- Infrastructure Support down 2 percent, down 6 percent at constant currency - Financing — revenues of $0.2 billion, up 15 percent, up 10 percent at constant currency
Cash Flow and Balance Sheet
In the first quarter, the company generated net cash from operating activities of $5.2 billion, up $0.8 billion year to year. IBM's free cash flow was $2.2 billion, up $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the first quarter and invested in the acquisition of Confluent.
IBM ended the first quarter with $11.8 billion of cash, restricted cash and marketable securities, down $2.6 billion from year-end 2025. Debt, including IBM Financing debt of $12.8 billion, totaled $66.4 billion, up $5.1 billion year to date.
Full-Year 2026 Expectations
- Revenue: The company continues to expect full-year constant currency revenue growth of more than 5 percent. At current foreign exchange rates, currency is expected to be about a half-point to one-point tailwind to growth for the year
- Free cash flow: The company continues to expect full-year free cash flow to increase by about $1 billion year-over-year
Dividend Declaration
The IBM board of directors declared an increase in the regular quarterly cash dividend to $1.69 per common share, payable June 10, 2026 to stockholders of record as of May 8, 2026.
This is the 31st year in a row that IBM has increased its quarterly cash dividend. IBM has paid consecutive quarterly dividends since 1916.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI, including the company's increased AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.
