IBM revenue rises 5% to $17.1 billion on software; free-cash-flow outlook raised

IBM (NYSE: IBM) said on Wednesday that third-quarter revenue rose 5% to $17.1 billion, led by software, and raised its full-year free-cash-flow outlook, according to its earnings release.

What happened

Revenue was $17.1 billion, up 5% and 6% at constant currency. Software revenue rose 8% (9% at constant currency), infrastructure revenue rose 4% (5%), and consulting revenue was flat (up 2%).

On a GAAP basis from continuing operations, gross profit margin was 56.8%, down 50 basis points, and diluted earnings per share were $2.31, up 26%. On an operating, non-GAAP basis, gross margin was 58.5%, down 20 basis points; pre-tax income was $3.3 billion, up 9%; and diluted earnings per share were $2.95, up 11%.

Cash flow and the balance sheet

Net cash from operating activities was $11.8 billion in the first nine months, up $2.6 billion from a year earlier, and free cash flow was $7.8 billion, up $0.6 billion. IBM ended the quarter with $11.1 billion of cash, restricted cash and marketable securities, down $3.4 billion from the end of 2025. It invested $11.4 billion in acquisitions this year. Total debt, including $12.7 billion of IBM Financing debt, was $63.8 billion, up $2.6 billion.

Outlook

IBM continues to expect full-year constant-currency revenue growth of 4% to 5%, with currency neutral to growth at current exchange rates. It now expects free cash flow to increase by more than $1 billion from a year earlier.

Chairman and Chief Executive Arvind Krishna said clients are "deploying Super Intelligence in ways that transform entire operating models."

IBM's board declared a regular quarterly dividend of $1.69 per share, payable December 10 to stockholders of record on November 10.

What to watch

Consulting, IBM's slowest-growing segment this quarter, was flat at reported rates; its performance will matter for the 4% to 5% full-year range.