TLDR
- IBM beat Q1 earnings estimates with EPS of $1.91 vs. $1.81 expected
- Revenue came in at $15.92 billion, above the $15.62 billion forecast
- Stock dropped ~7% in after-hours trading despite the beat
- IBM held its full-year guidance steady — no raise, no cut
- Red Hat Enterprise Linux growth decelerated, with supply chain and federal spending flagged as headwinds
IBM reported a solid first quarter on Wednesday, beating Wall Street on both earnings and revenue. But the market wasn’t impressed. The stock fell around 7% in after-hours trading as investors focused on what IBM didn’t do — raise its full-year guidance.
International Business Machines Corporation, IBM
Adjusted EPS came in at $1.91, topping the $1.81 consensus. Revenue hit $15.92 billion, beating estimates of $15.62 billion and marking 9% year-over-year growth.
Net income rose to $1.22 billion, or $1.28 per share, up from $1.06 billion, or $1.12 per share, in Q4 2024. By most measures, it was a clean quarter.
$IBM Q1’26 EARNINGS HIGHLIGHTS
🔹 Revenue: $15.92B (Est. $15.61B) 🟢; +9% YoY
🔹 Adj. EPS: $1.91 (Est. $1.81) 🟢; +19% YoY
🔹 Software: $7.05B (Est. $7.04B) 🟢; +11% YoY
🔹 Operating Gross Margin: 57.7%; +110 bps YoY
🔹 FCF: $2.22B (Est. $2.17B) 🟢; up $0.3B YoYFY Guide:
🔹… pic.twitter.com/ZUUCVFjgSm— Wall St Engine (@wallstengine) April 22, 2026
IBM’s software segment posted revenue of $7.05 billion — up 11% and just above the $7.02 billion analyst estimate. Red Hat, a key growth driver since its $34 billion acquisition in 2019, showed 13% revenue growth, accelerating from 10% in Q4.
That acceleration in Red Hat is the kind of number investors usually want to see. But the broader Red Hat Enterprise Linux (RHEL) story was more complicated.
Red Hat Hits a Speed Bump
CFO Jim Kavanaugh flagged a deceleration in RHEL revenue growth, pointing to two culprits: reduced federal government signings following the late-2025 government shutdown, and a disrupted hardware supply chain.
“RHEL is tied to enterprise hardware placements overall,” Kavanaugh said on the analyst call. Management said it’s watching supply chain impacts closely heading into the rest of 2026.
Consulting revenue came in at $5.27 billion, up 4% year-over-year, but just missed the $5.28 billion StreetAccount consensus. Not a disaster, but not a catalyst either.
On the guidance front, IBM held its full-year outlook steady: over 5% revenue growth at constant currency and a $1 billion increase in free cash flow. CEO Arvind Krishna called it a “strong start,” but the company made no move to raise the bar.
CFO Kavanaugh acknowledged that reality directly. “I don’t think we’ve ever raised guidance in a first quarter,” he told analysts, describing the company’s posture as that of a “prudent operator.”
Geopolitical Noise, But No Direct Hit
IBM also addressed the ongoing conflict in the Middle East, which escalated when war between the U.S. and Iran broke out on Feb. 28. CEO Krishna said IBM actually saw its strongest Middle East revenue growth in decades during Q1.
“Middle East developments didn’t impact us in the first quarter,” Krishna said. He pointed to IBM’s diversity across geographies, industries, and enterprise clients as a buffer against uncertainty.
IBM also completed its acquisition of Confluent, a data streaming software company, near the end of the quarter. No financial terms were disclosed in the earnings materials.
IBM’s stock is down roughly 15% in 2026, part of a broader software selloff driven by investor concern over AI’s impact on traditional software businesses. Wednesday’s results didn’t change that narrative.
The after-hours drop of around 7% puts the stock at roughly $235, based on Wednesday’s close near $252.
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