IBM Stock Plunges After-Hours Despite Q3 Revenue Beat, Guidance Hike: Analyst Says Buy Any ‘Knee-Jerk’ Weakness

• The company’s GenAI book of business stood at more than $9.5 billion, accelerating from the $7.5 billion in the previous quarter.
• The board approved a regular quarterly cash dividend of $1.68, payable on Dec. 10.
• Commenting on the results, Wedbush’s Daniel Ives said IBM delivered “solid metrics with AI path front and center into the fiscal year 2026.”

International Business Machines Corp. (IBM) stock slumped 6.52% in extended trading despite the business services giant’s fairly positive quarterly results and guidance raise but retail sentiment toward the stock improved notably to buoyant levels.

IBM’s stock, which has gained over 33% year-to-date, ended Wednesday’s session up nearly 2% at $287.51. 

IBM’s Q3 Earnings Snapshot

Armonk, New York-based IBM’s CEO, Arvind Krishna, said key quarterly metrics such as revenue, profit, and free cash flow all exceeded the company’s expectations as clients across the globe leveraged the company’s technology and domain expertise to drive productivity and deliver real business value with artificial intelligence (AI). He noted that the company’s generative AI (GenAI) book of business stood at more than $9.5 billion, accelerating from the $7.5 billion in the previous quarter.

Here’s how the third-quarter headline metrics panned out:

-Revenue: $16.3 billion, up 9% year-over-year (YoY), Vs. Fiscal.ai-compiled $16.10 billion consensus

-Adjusted earnings per share (EPS): $2.65, aligning with the consensus

-Adjusted gross margin: 58.7%, up  1.2 points

IBM CFO James Kavanaugh attributed the accelerated revenue and profit growth to “new innovation, the strength and diversity of our portfolio, and our disciplined execution.” “Consistent focus on the fundamentals of our business delivered double-digit growth in adjusted EBITDA, and drove another quarter of strong free cash flow, the fuel for our investments and ability to return value to shareholders.”

Among business segments, infrastructure revenue ($3.6 billion) climbed 17% YoY, while software ($7.2 billion) and consulting revenue ($5.3 billion) rose 10% and 3%, respectively. In the infrastructure business, IBM z17, which integrates advanced AI into hybrid cloud, saw 61% growth. The consulting business showed strong GenAI demand with over $1.5 billion in bookings in the quarter. IBM attributed the strong software revenue growth to automation, which was up 22%.

Commenting on the results, Wedbush’s Daniel Ives said IBM delivered “solid metrics with AI path front and center into the fiscal year 2026,” adding that AI projects were ramping big. The analyst attributed the strong AI book of business to increasing demand for the company’s AI agents and assistants, as well as the widening of its reach across verticals. 

IBM Shareholder Return

The board approved a regular quarterly cash dividend of $1.68, payable on Dec. 10, to shareholders of record on Nov. 10. 

What Retail Is Saying About IBM’s Q3 Print

On Stocktwits, retail sentiment toward the stock soared to an ‘extremely bullish’ level by late Wednesday, from ‘bearish’ a day ago. The message volume also perked up to ‘extremely high’ levels, with the 24-hour change in the retail chatter leading up to late Wednesday at about 800%. The stock was among the top 15 trending equity tickers on the platform. 

Another user smelt a dip-buying opportunity. “Good time to start buying in?" they asked.

What Is IBM’s Outlook?

Krishna said, “Given the strength of our business, we are raising our full-year outlook for revenue growth and free cash flow.” The company guided constant currency revenue growth of more than 5% and free cash flow of $14 billion for the year, versus its previous outlook of at least 5% revenue growth and $13.5 billion in free cash flow.

In a prepared speech delivered on the earnings call, Krishna made note of macro uncertainties but stated that overall, the company continued to see broad-based demand from clients.

Analyst Ives said, “We would be buyers of any modest knee-jerk weakness in the stock,” as he sees IBM well-positioned to capitalize on the “current demand wave for hybrid cloud and AI Applications.”

IBM is part of Wedbush’s Best Ideas and “Ives AI 30” lists. The research firm maintained an ‘Outperform’ rating and $325 price target for the stock.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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