IBM 2026 Q3

Total revenue growth accelerated to 6%, above the base case management had set in July, reflecting acceleration across software, infrastructure, and consulting segments.

“Revenue growth in the third quarter accelerated to 6% above the base case we laid out in July.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Full-year software growth guidance raised to approximately 7%-8%, with a revised base case of about 7%, up from the prior base case, on strength of Q3 results.

“we now expect full-year software growth of approximately 7%-8%, with about 7% as the revised base case.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Full-year transaction processing growth guidance raised to flat, up from a prior expectation of a low- to mid-single-digit decline for the second half.

“For transaction processing, we are raising our expectations for the full year, with growth expected to be flat.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Software revenue growth accelerated four points sequentially to 9%, with over four points of organic growth, driven by both recurring revenue strength and a rebound in transactional business.

“Software revenue growth accelerated four points sequentially to 9% this quarter, including over four points of organic growth.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Infrastructure revenue growth accelerated to 5%, up from prior levels, driven by 32% growth in distributed infrastructure.

“Turning to infrastructure, revenue growth accelerated to 5%, driven by 32% growth in distributed infrastructure.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Consulting revenue grew 2%, a modest improvement, as clients modernized to deploy AI securely and at scale.

“Consulting revenue grew 2% as clients modernized to deploy AI securely and at scale.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Full-year consulting revenue growth guidance raised to low- to mid-single digits, a modest acceleration supported by backlog quality and GenAI momentum.

“backlog quality and momentum in GenAI continue to support a modest acceleration to low- to mid-single-digit revenue growth for the year.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Transaction processing grew 10%, reversing second-quarter softness, which management says confirms the earlier weakness was a timing issue rather than a decline in underlying mainframe demand.

“validating our view that the softness we saw in the second quarter reflected timing rather than underlying demand.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Despite the Q3 double-digit TP rebound, management expects growth to normalize and moderate going into Q4 and 2027 rather than sustain double-digit levels.

“I do not expect double-digit performance in TP to keep going”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Red Hat bookings growth accelerated back to the high teens after a softer period, signaling renewed demand momentum for OpenShift and related offerings.

“Red Hat again grew 11% with bookings growth accelerating back to the high teens.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Automation growth was impacted by a tougher year-over-year compare, a deceleration versus prior periods for that sub-segment.

“automation was impacted by a tougher compare.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

OpenShift ARR growth accelerated to over 30% as organizations scale AI applications and agents into production, now a $2.4 billion ARR business.

“OpenShift ARR growth accelerated to over 30% as organizations scale super intelligence applications and agents into production.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

z17 has generated more than $1 billion of incremental revenue over six quarters compared with prior mainframe programs, the strongest innovation cycle in the platform's history.

“generating more than $1 billion of incremental revenue over six quarters, compared with prior programs.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

New single-frame and rack-mount IBM Z systems drove the highest mid-range IBM Z revenue launch in nearly two decades.

“contributing to the highest mid-range revenue launch in IBM Z this quarter in nearly two decades.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Lightwell, newly made generally available, has rapidly built a pipeline approaching $700 million with some of the world's largest enterprises signing on in a short period.

“we have built a pipeline approaching $700 million in a short period of time.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Data segment grew 20%, driven by continued strong Confluent performance with bookings growth of about 20%, reflecting early traction of the acquisition.

“Data grew 20%, driven by another strong performance from Confluent, with bookings growth of about 20%.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Storage delivered record revenue growth and continued share gains, driven by broad-based demand across FlashSystem, Storage Fusion, Tape, and IBM Z storage as AI drives data growth.

“Storage delivered record revenue growth and continued to gain market share, with broad-based demand across FlashSystem, Storage Fusion, Tape, and IBM Z Storage.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

The company drove 500 basis points of gross productivity in the quarter, well above its historical model, improving the structural competitiveness of the margin base.

“500 basis points is well above what our model is overall.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Full-year operating pre-tax margin expansion guidance raised to reflect flow-through from the Q3 earnings beat plus continued operational discipline.

“We continue to expect 100 basis points of operating pre-tax margin expansion for the full year, reflecting the flow-through from the third quarter earnings beat.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Segment profit margins expanded notably, up 210 basis points in software and 120 basis points in infrastructure, driven by ongoing productivity actions.

“Segment profit margins expanded by 210 basis points in software and 120 basis points in infrastructure, driven by ongoing productivity actions.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Consulting segment profit margin declined modestly as productivity gains were reinvested into digital assets to accelerate a shift toward a services-as-software model.

“Consulting segment profit margin declined modestly as we reinvested productivity gains into digital assets, accelerating our transition towards a services-as-software model.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Full-year free cash flow growth expectation raised to more than $1 billion year-over-year, driven primarily by Adjusted EBITDA growth.

“enable us to raise our year-over-year free cash flow growth expectation to more than $1 billion.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Free cash flow margin for the first nine months reached the highest level in reported company history, reflecting productivity execution.

“Our free cash flow margin for the first nine months of the year is the highest in reported history.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Management accelerated productivity initiatives this quarter, driving efficiencies across G&A and sales to enhance margins and free cash flow while continuing to invest for growth.

“we accelerated our productivity initiatives to help enhance our operating profit margin and free cash flow commitments while continuing to invest for growth.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

The performance gap between frontier LLMs and open-weight models has narrowed significantly from 2024 to 2026, shifting enterprise economics toward cheaper open-weight deployments, which management frames as a tailwind for IBM's hybrid offerings.

“the gap was not 70 to 20 or 30, it was 70 to 50.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

M&A integration focus is shifting from 2026's Confluent integration and go-to-market scaling toward capturing growth synergies in 2027.

“2026 was about integrating and getting Confluent into our mode of operation and go-to-market and scale. 2027 is around the growth synergies.”— Jim Kavanaugh, Senior Vice President and Chief Financial Officer

Sovereign AI has shifted from a minor topic in 2024 to a much larger conversation by 2026, as enterprises seek to keep data and model control in-house, creating a tailwind for IBM's infrastructure and software.

“Sovereign AI is definitely becoming a much larger conversation.”— Arvind Krishna, Chairman, President, and Chief Executive Officer

Enterprise AI adoption is maturing, with clients moving from broad, uncontrolled experimentation to disciplined, workflow-redesign-focused deployments demanding proven ROI, which management says benefits IBM's platform approach.

Per Arvind Krishna, Chairman, President, and Chief Executive Officer