Earnings
IBM lifts free cash flow outlook as software growth eases to 8%
Third-quarter revenue rose 5% to $17.1 billion, but software growth slowed from a year earlier and IBM Z revenue fell 20% against a strong mainframe comparison.
HedgeWeekly News Desk ·
IBM said on Wednesday that third-quarter revenue rose 5% to $17.1 billion, or 6% at constant currency, and raised its free cash flow forecast, now expecting full-year free cash flow to grow by more than $1 billion from 2025. It kept its outlook for 4% to 5% constant-currency revenue growth.
Software, the company's largest segment, brought in $7.8 billion, up 8%. That compares with roughly 10% growth in the same quarter of 2025. Within software, Data rose 19%, Transaction Processing 9% and Hybrid Cloud, which includes Red Hat, 11%, while Automation fell 3%. Consulting revenue was flat at $5.3 billion.
Infrastructure revenue grew 4% to $3.7 billion. IBM Z revenue dropped 20% a year after mainframe sales had surged 61% on a new product cycle, while Distributed Infrastructure climbed 31%. Operating earnings per share rose 11% to $2.95, and quarterly free cash flow increased to $3.0 billion from $2.4 billion.
Why it matters: IBM has been valued largely on its software mix and cash generation, so the slower software growth and the mainframe comparison are the figures investors are likely to weigh against the higher cash flow target. With year-to-date free cash flow at $7.8 billion, the fourth quarter will show whether IBM can deliver the raised target while holding growth inside its 4% to 5% range.