IBM Stock Rises After-Hours, Tops Q3 Revenue Estimates On Software Strength And Recovery In Delayed Contracts

• Third-quarter sales grew 5% to $17.1 billion, exceeding average analyst projections of $16.83 billion 
• IBM recovered roughly two-thirds of the mainframe and related software deals that clients postponed earlier in the year. 
• IBM expects full-year free cash flow to increase by more than $1 billion year-over-year.

International Business Machines Corp. (IBM) share price added 3% after-hours on Wednesday after the company reported third-quarter revenue and earnings that beat Wall Street expectations, bolstered by steady software expansion and a resurgence in big-ticket mainframe sales.

The firm posted revenue of $17.1 billion for the three months ended Sept. 30, up 5% from $16.33 billion in the prior-year period. Earnings came in at $2.95 per share, topping the average analyst forecast of $2.86 per share.

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Software And Mainframe Momentum

The company's core Software division expanded 8.3% to $7.8 billion, outpacing consensus projections of $7.64 billion. Growth within the segment was anchored by cloud offerings, including Red Hat, which rose 11%, and Data software, which surged 19%.

Meanwhile, IBM's Infrastructure division posted a 4% revenue increase to $3.7 billion, ahead of Wall Street estimates. Chief Financial Officer Jim Kavanaugh noted that IBM successfully closed about two-thirds of the mainframe and tied software agreements that slipped out of earlier quarters.

Clients had temporarily shifted IT budgets toward specialized artificial intelligence hardware and chips earlier in the year, delaying enterprise server purchases. However, executive leadership signaled that core infrastructure spending has begun normalizing.

"Our clients are now deploying Super Intelligence in ways that transform entire operating models, instead of simply addressing narrow or novel problems," Chief Executive Officer Arvind Krishna said in a statement.

Full-Year Outlook

IBM reaffirmed its projection for full-year revenue growth of 4% to 5% at constant currency. Raising its cash generation outlook, the company now expects 2026 free cash flow to increase by over $1 billion year-over-year. Through the first nine months of the year, IBM generated $7.8 billion in free cash flow and returned $1.6 billion to shareholders via quarterly dividend payouts during the third quarter.

The enterprise tech leader ended the quarter with $11.1 billion in cash and marketable securities. Strategic investments remained a priority, with $11.4 billion deployed toward corporate acquisitions so far in 2026 as IBM continues building out its cloud, automation, and data capabilities.

IBM Stock: Retail View 

Retail sentiment on Stocktwits was ‘bullish’ with ‘high’ message volumes. 

IBM stock has lost 17% year-to-date.

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