IBM says third-quarter revenue rose 5% to $17.1 billion and raises its full-year free cash flow outlook

As of 7:57 a.m. ET, Thursday, Oct. 22, 2026

IBM said Wednesday that its third-quarter revenue rose 5% from a year earlier to $17.1 billion, or 6% at constant currency, and that it now expects full-year free cash flow to increase by more than $1 billion.

Net income from continuing operations rose 26% to $2.2 billion, or $2.31 a diluted share, according to the company's release. On an operating basis, which excludes some items, IBM earned $2.95 a share, up 11%.

"Disciplined execution throughout the quarter drove accelerated revenue growth and strong free cash flow," Chairman and CEO Arvind Krishna said. "For the full year, we continue to expect constant currency revenue growth in the range of four-to-five percent, and we now expect free cash flow to increase by more than $1 billion year-over-year."

By segment

Software revenue rose 8% to $7.8 billion, with Hybrid Cloud (Red Hat) up 11%, Data up 19%, Transaction Processing up 9% and Automation down 3%, IBM said. Consulting revenue was flat at $5.3 billion. Infrastructure revenue rose 4% to $3.7 billion; within it, IBM Z revenue fell 20% while Distributed Infrastructure rose 31%.

Cash

IBM generated $3.0 billion in free cash flow in the quarter, up $0.7 billion, and $7.8 billion in the first nine months, the company said. It returned $1.6 billion to shareholders in dividends in the quarter. IBM ended September with $11.1 billion in cash, restricted cash and marketable securities and $63.8 billion in debt, and said it had invested $11.4 billion in acquisitions this year.

The release's subheadline begins "Exceeded expectations." The release does not say whose expectations it was measured against.