TLDR
- IBM stock closed up about 4% at $251.50 on Wednesday, then moved to about $255 in after-hours trading.
- Q3 adjusted earnings were $2.95 a share on $17.1 billion in revenue, ahead of estimates.
- Software revenue rose 8% to $7.8 billion, beating forecasts.
- IBM now expects free cash flow to grow by more than $1 billion this year.
- Gross margin came in at 58.5%, below the 59.1% analysts expected.
IBM stock closed up about 4% on Wednesday at roughly $251.50, a gain of $9.54. It then traded near $255 in after-hours action after the company posted third-quarter results.
International Business Machines Corporation, IBM
IBM reported adjusted earnings of $2.95 a share. Analysts had expected between $2.85 and $2.86, depending on the source.
Revenue rose 4.7% from a year ago to $17.1 billion. Wall Street had forecast about $16.8 billion.
IBM $IBM JUST REPORTED Q3 EARNINGS
– Revenue: $17.1B, beating est. of $16.82B 🟢
– Adj EPS: $2.95, beating est. of $2.86 🟢
– Free Cash Flow: $3.0B
– Constant Currency Revenue Growth: 6%
– Hybrid Cloud (Red Hat): +11% YoY
– IBM Z: -20% YoY, -19% cc
– Distributed Infrastructure:… pic.twitter.com/ojqk4mFdrW— WOLF (@WOLF_Financial) October 21, 2026
Growth picked up slightly from the prior quarter. It remains well below the 9.5% pace in the first quarter.
Software and Infrastructure Lead the Way
Software was the standout. Revenue grew 8% to $7.8 billion, topping the $7.66 billion consensus.
Infrastructure revenue rose 4% to about $3.7 billion. That beat the $3.57 billion analysts had penciled in.
Consulting revenue was flat at $5.34 billion, just under the $5.37 billion forecast. Its gross margin narrowed to 27.4% from 28.9% in the second quarter.
CFO Jim Kavanaugh said AI makes up about 30% of consulting revenue and 35% of the backlog. He said IBM reinvested productivity gains into digital assets.
Net income was $2.19 billion, or $2.30 a share. That compares with $1.74 billion, or $1.84 a share, a year ago.
IBM’s adjusted gross margin was 58.5%. The StreetAccount consensus was 59.1%.
Guidance and the July Hangover
IBM said it now expects full-year free cash flow to rise by more than $1 billion. The July forecast called for a gain of about $1 billion.
Revenue guidance did not change. IBM still sees constant-currency growth of 4% to 5% for 2026.
Kavanaugh said he is comfortable with street estimates of about $32 billion in revenue for the year.
Investors have been cautious since July 14. IBM pre-announced weak second-quarter results, and the stock fell 25% that day, its worst session on record.
About two-thirds of the delayed mainframe deals closed in the third quarter, the company said. CEO Arvind Krishna had said in July that a third had closed by then.
The stock is still down more than 13% since July 13. The S&P 500 and Nasdaq Composite have each gained more than 3% in that time.
Jefferies analyst Brent Thill called the quarter a “show-me story.” Morgan Stanley said the results “should be viewed as neutral to positive” but that the setup after this is tougher.
IBM also agreed during the quarter to buy HRL Laboratories from Boeing and General Motors. No price was disclosed.
Earlier this month, IBM advanced to the final phase of a federal quantum benchmarking program. The program audits progress toward an error-corrected system by 2033.
As of Wednesday’s close, IBM stock is down 15% this year, while the S&P 500 has gained 13%.
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