IBM Beats Q3 Revenue and Earnings Estimates, Raises Full-Year Free Cash Flow Guidance
IBM reported Q3 revenue of $17.10 billion and adjusted EPS of $2.95, both beating consensus. Software grew 8%, and the company raised its full-year free cash flow increase forecast to over $1 billion.
US technology giant IBM released its third-quarter earnings report on October 21, 2026, beating Wall Street consensus estimates for both revenue and adjusted earnings per share. The company posted revenue of $17.10 billion, up about 5% year-over-year, exceeding the LSEG consensus of $16.82 billion. Adjusted EPS came in at $2.95, surpassing the expected $2.86. Net income rose to $2.19 billion, or $2.30 per share, compared to $1.74 billion a year ago.
By segment, software was the primary growth driver, generating $7.80 billion in revenue, an 8% increase that topped analyst expectations of $7.66 billion. Infrastructure revenue reached $3.70 billion, up 4% and also above consensus. However, consulting services revenue remained flat at $5.34 billion, slightly missing the $5.37 billion estimate. Additionally, the adjusted gross margin of 58.5% fell short of the StreetAccount consensus of 59.1%, indicating some pressure on costs or product mix.
Regarding guidance, IBM raised its forecast for full-year free cash flow increase from 'approximately $1 billion' (as of July) to 'more than $1 billion,' while maintaining its constant-currency revenue growth outlook of 4% to 5% for 2026. CEO Arvind Krishna stated in a release that clients are deploying 'Super Intelligence' to transform entire operating models rather than just addressing narrow problems, reflecting deeper enterprise AI adoption.
Notably, IBM shares climbed in extended trading, but the stock has fallen 15% year-to-date as of Wednesday's close, significantly underperforming the S&P 500 index, which gained 13%. This divergence suggests that despite strong short-term results, investors remain cautious about IBM's long-term competitiveness in the traditional IT cycle.