IBM Beats Q3 2026 Earnings and Revenue Estimates, Raises Software Outlook

IBM beat on both lines in its third quarter. Revenue came in at $17.1 billion, about 1.4% above consensus, and operating EPS of $2.95 topped the $2.88 estimate. Revenue rose 5% as reported and 6% at constant currency, according to the company's release filed with the SEC, while GAAP diluted EPS from continuing operations was $2.31, up 26%.

Software did the heavy lifting. The segment grew 8% to $7.8 billion (9% at constant currency), with Data up 19%, Hybrid Cloud (Red Hat) up 11% and Transaction Processing up 9%, while Automation slipped 3%. Consulting was flat at $5.3 billion, and Infrastructure rose 4% to $3.7 billion even as IBM Z revenue fell 20% from a year ago. On the call, CEO Arvind Krishna said the new Lightwell vulnerability-remediation service has built a pipeline approaching $700 million in a short period; that is pipeline, not booked revenue.

Reuters reported that IBM raised its annual software revenue outlook as deal delays eased. On the call, the CFO pointed to full-year software growth of about 7% to 8%, with 7% as the base case, and said roughly a quarter of the software acceleration came from previously deferred deals and three quarters from net new business. IBM kept its full-year constant-currency revenue growth outlook at 4% to 5% and now expects free cash flow to rise by more than $1 billion year over year. Free cash flow was $3.0 billion in the quarter, up $0.7 billion, and $7.8 billion year to date, up $0.6 billion, slightly below the roughly $8 billion figure in early coverage.

The shares closed Wednesday's regular session up about 3.9% ahead of the print, after falling 18.3% year to date. What to watch: whether software growth holds near the upper end of the 7% to 8% range once the catch-up from slipped deals is spent, how quickly the Lightwell pipeline converts to revenue, and how deep the IBM Z decline runs.