Company provides updated full-year expectations
Jul 22, 2026
ARMONK, N.Y., July 22, 2026 /PRNewswire/ — IBM (NYSE: IBM) today announced second-quarter 2026 earnings results.
“We are confident in IBM’s strategy and portfolio, and in our ability to capture growth opportunities ahead. We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio – across software, infrastructure, and consulting – is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future,” said Arvind Krishna, IBM chairman, president and chief executive officer. “In addition, we are taking action to accelerate our revenue growth and profitability, driving productivity across the company with AI and automation, and heavily investing in commercializing innovation at speed and scale. We now expect constant currency revenue growth in the range of four-to-five percent, and we continue to expect free cash flow to increase by about $1 billion year-over-year for the full year.”
Full-Year 2026 Expectations
Revenue: The company now expects full-year constant currency revenue growth in the range of four-to-five percent. At current foreign exchange rates, currency is expected to be neutral to growth for the year
Free cash flow: The company continues to expect full-year free cash flow to increase by about $1 billion year-over-year
Operational Focus Areas
High-Growth Portfolio: Areas of IBM’s software business that help clients manage, deploy and build AI-ready solutions, like Red Hat, the watsonx portfolio, HashiCorp, and Confluent continue to deliver strong performance. Within Distributed Infrastructure, Power and Storage grew at a record pace in the second quarter, now having built up an order backlog of nearly $500 million. Together, these offerings closely map to where client demand is strongest. To capture these growth opportunities, IBM is accelerating changes to its go-to-market model by expanding sales coverage across thousands of additional clients where there is significant opportunity. As AI adoption moves from experimentation to enterprise-scale deployment, the company is also investing in more specialized technical and client-facing talent, including Forward Deployed Engineers.
Rapid Innovation at Scale: IBM is acting decisively to capture new opportunities as they arise. Lightwell, a new capability to address open source security vulnerabilities, leverages IBM and Red Hat’s trust within the open source community, unique approach to AI, and global scale. In the first two weeks of availability, Lightwell has already made more than 7,500 open source patches available to help clients secure vulnerabilities. Additionally, quantum computing continues to be an investment priority for the company. In May, with the U.S. Department of Commerce, IBM announced a letter of intent to build Anderon, the world’s first pure-play quantum wafer foundry. IBM will invest more than $10 billion in quantum over the next five years, and remains on track to deliver the first large-scale fault-tolerant quantum computer by 2029.
Productivity Enables Investment and Value: IBM is accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain. These efforts help enhance margin and free cash flow, and strengthen the company’s ability to capture significant growth opportunities. The company now expects improved pre-tax income margin expansion for the full year.
“Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow,” said James Kavanaugh, IBM senior vice president and chief financial officer. “In a quarter like this, it is critical that our financial and operational discipline remains strong and that we continue to invest for growth while returning value to shareholders through our dividend.”
SECOND-QUARTER 2026 INCOME STATEMENT SUMMARY
Revenue
Gross
Profit
Gross
Profit
Margin
Pre-tax
Income
Pre-tax
Income
Margin
Net
Income
Diluted
Earnings
Per Share
GAAP from
Continuing
Operations
$ 17.2 B
$ 9.9 B
57.7
%
$ 2.5 B
14.4
%
$ 2.2 B
$ 2.27
Year/Year
1
%
(1)
%
(1.0)
Pts
(5)
%
(0.9)
Pts
(1)
%
(2)
%
Operating
(Non-GAAP)
$ 10.2 B
59.4
%
$ 3.3 B
19.2
%
$ 2.8 B
$ 2.93
Year/Year
0
%
(0.7)
Pts
3
%
0.3
Pts
5
%
5
%
Segment Results for Second Quarter
Software — revenues of $7.8 billion, up 5 percent:
– Hybrid Cloud (Red Hat) up 11 percent
– Automation up 4 percent, up 3 percent at constant currency
– Data up 19 percent, up 18 percent at constant currency
– Transaction Processing down 8 percent, down 9 percent at constant currency
Consulting — revenues of $5.3 billion, flat, up 1 percent at constant currency:
– Strategy and Technology flat, up 1 percent at constant currency
– Intelligent Operations flat, up 1 percent at constant currency
Infrastructure — revenues of $3.8 billion, down 7 percent:
– Hybrid Infrastructure down 10 percent
— IBM Z down 42 percent
— Distributed Infrastructure up 37 percent
– Infrastructure Support down 1 percent
Financing — revenues of $0.2 billion, up 12 percent, up 11 percent at constant currency
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year to year. IBM’s free cash flow was $2.5 billion, down $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the second quarter.
For the first six months of the year, the company generated net cash from operating activities of $7.8 billion, up $1.7 billion year to year. IBM’s free cash flow was $4.8 billion, flat year to year.
IBM ended the second quarter with $8.2 billion of cash, restricted cash and marketable securities, down $6.3 billion from year-end 2025. The company invested $10.5 billion in acquisitions this year. Debt, including IBM Financing debt of $13.0 billion, totaled $62.0 billion, up $0.7 billion year to date.
Dividend Declaration
The IBM board of directors approved a regular quarterly cash dividend of $1.69 per common share, to stockholders of record on August 10, 2026. With payment of the September 10, 2026 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company’s ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI, including the company’s increased AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.
Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:
adjusting for currency (i.e., at constant currency);
presenting operating (non-GAAP) earnings per share amounts and related income statement items;
free cash flow;
net cash from operating activities excluding IBM Financing receivables;
adjusted EBITDA;
adjusted EBITDA margin.
The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q26. Presentation charts will be available shortly before the Webcast.
Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).
Contact: IBM
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
Erin McElwee, 347-920-6825
erin.mcelwee@ibm.com
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; $ in millions except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
REVENUE BY SEGMENT
Software
$ 7,761
$ 7,387
$ 14,813
$ 13,722
Consulting
5,327
5,314
10,599
10,382
Infrastructure
3,835
4,142
7,161
7,027
Financing
186
166
406
357
Other
52
(31)
100
30
TOTAL REVENUE
17,162
16,977
33,079
31,519
GROSS PROFIT
9,907
9,977
18,857
18,008
GROSS PROFIT MARGIN
Software
82.6
%
83.9
%
82.7
%
83.7
%
Consulting
28.9
%
27.5
%
28.2
%
27.4
%
Infrastructure
58.4
%
61.5
%
57.7
%
57.9
%
Financing
42.5
%
45.7
%
43.0
%
45.8
%
TOTAL GROSS PROFIT MARGIN
57.7
%
58.8
%
57.0
%
57.1
%
EXPENSE AND OTHER INCOME
SG&A
4,981
5,027
10,071
9,913
R&D
2,311
2,097
4,485
4,047
Intellectual property and custom development income
(166)
(215)
(338)
(468)
Other (income) and expense
(185)
(39)
(186)
(204)
Interest expense
486
510
959
965
TOTAL EXPENSE AND OTHER INCOME
7,428
7,380
14,991
14,253
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
2,479
2,597
3,866
3,755
Pre-tax income margin
14.4
%
15.3
%
11.7
%
11.9
%
Provision for/(benefit from) income taxes
313
404
484
507
Effective tax rate
12.6
%
15.5
%
12.5
%
13.5
%
INCOME FROM CONTINUING OPERATIONS
$ 2,166
$ 2,193
$ 3,382
$ 3,248
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of
taxes
(1)
1
(1)
1
NET INCOME
$ 2,165
$ 2,194
$ 3,381
$ 3,249
EARNINGS PER SHARE OF COMMON STOCK
Assuming dilution
Continuing operations
$ 2.27
$ 2.31
$ 3.55
$ 3.43
Discontinued operations
$ 0.00
$ 0.00
$ 0.00
$ 0.00
TOTAL
$ 2.27
$ 2.31
$ 3.55
$ 3.43
Basic
Continuing operations
$ 2.30
$ 2.36
$ 3.60
$ 3.49
Discontinued operations
$ 0.00
$ 0.00
$ 0.00
$ 0.00
TOTAL
$ 2.30
$ 2.36
$ 3.60
$ 3.50
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M’s)
Assuming dilution
953.3
948.0
952.7
946.7
Basic
941.2
930.8
939.9
929.4
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
($ in millions)
At June 30,
2026
At December 31,
2025
ASSETS:
Current assets:
Cash and cash equivalents
$ 7,172
$ 13,587
Restricted cash
45
54
Marketable securities
960
830
Notes and accounts receivable – trade, net
6,044
8,112
Short-term financing receivables
Held for investment, net
5,782
7,344
Held for sale
874
1,131
Other accounts receivable, net
1,348
1,052
Inventories
1,746
1,220
Deferred costs
1,238
1,084
Prepaid expenses and other current assets
3,188
2,530
Total current assets
28,398
36,944
Property, plant and equipment, net
5,736
5,899
Operating right-of-use assets, net
3,068
3,129
Long-term financing receivables, net
7,126
7,708
Prepaid pension assets
7,645
7,544
Deferred costs
835
825
Deferred taxes
8,709
8,610
Goodwill
74,599
67,717
Intangibles, net
13,955
11,391
Investments and sundry assets
2,028
2,112
Total assets
$ 152,099
$ 151,880
LIABILITIES:
Current Liabilities:
Taxes
$ 2,023
$ 2,347
Short-term debt
5,775
6,424
Accounts payable
4,395
4,756
Compensation and benefits
3,364
4,114
Deferred income
16,160
16,101
Operating lease liabilities
770
800
Other liabilities
3,425
4,116
Total current liabilities
35,912
38,658
Long-term debt
56,212
54,836
Retirement-related obligations
8,603
9,018
Deferred income
4,272
4,271
Operating lease liabilities
2,515
2,547
Other liabilities
10,044
9,810
Total liabilities
117,558
119,139
EQUITY:
IBM stockholders’ equity:
Common stock
64,600
63,318
Retained earnings
155,937
155,648
Treasury stock – at cost
(170,934)
(170,605)
Accumulated other comprehensive income/(loss)
(15,151)
(15,713)
Total IBM stockholders’ equity
34,452
32,648
Noncontrolling interests
89
93
Total equity
34,541
32,740
Total liabilities and equity
$ 152,099
$ 151,880
INTERNATIONAL BUSINESS MACHINES CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in millions)
2026
2025 (1)
2026
2025 (1)
Cash flows from operating activities:
Net income
$ 2,165
$ 2,194
$ 3,381
$ 3,249
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation (2)
533
578
1,088
1,114
Amortization of capitalized software and acquired intangible assets
817
687
1,535
1,328
Stock-based compensation
498
441
1,004
842
Net (gain)/loss on divestitures, asset sales and other
(67)
(18)
(78)
(40)
Changes in operating assets and liabilities, net of
acquisitions/divestitures
(1,349)
(2,180)
836
(421)
Net cash provided by operating activities
2,597
1,701
7,766
6,071
Cash flows from investing activities:
Payments for property, plant and equipment
(229)
(209)
(461)
(454)
Proceeds from disposition of property, plant and equipment/other
23
37
31
111
Investment in software
(154)
(164)
(313)
(314)
Purchases of marketable securities and other investments
(1,259)
(1,255)
(2,871)
(7,740)
Proceeds from disposition of marketable securities and other
investments
1,152
4,036
3,123
4,962
Acquisition of businesses, net of cash acquired
(15)
(747)
(10,480)
(7,845)
Divestiture of businesses, net of cash transferred
–
–
1
(1)
Net cash provided by/(used in) investing activities
(481)
1,698
(10,970)
(11,281)
Cash flows from financing activities:
Proceeds from new debt
0
7
7,437
8,385
Payments to settle debt
(4,213)
(1,308)
(7,141)
(2,565)
Short-term borrowings/(repayments) less than 90 days – net
1
0
0
(29)
Common stock repurchases for tax withholdings
(116)
(153)
(465)
(437)
Proceeds from issuance of shares
240
186
418
401
Financing – other
(49)
(22)
(91)
(54)
Cash dividends paid
(1,590)
(1,563)
(3,166)
(3,112)
Net cash provided by/(used in) financing activities
(5,728)
(2,855)
(3,008)
2,589
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
(35)
320
(211)
487
Net change in cash, cash equivalents and restricted cash
(3,646)
865
(6,423)
(2,134)
Cash, cash equivalents and restricted cash at the beginning of the period
10,864
11,161
13,640
14,160
Cash, cash equivalents and restricted cash at the end of the period
$ 7,217
$ 12,026
$ 7,217
$ 12,026
_____________________
(1) Reclassified to align with the Consolidated Statement of Cash Flows presentation.
(2) Includes operating lease right-of-use assets amortization.
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in billions)
2026
2025
Yr/Yr
2026
2025
Yr/Yr
Net income as reported (GAAP)
$ 2.2
$ 2.2
$ 0.0
$ 3.4
$ 3.2
$ 0.1
Less: income from discontinued operations, net of tax
0.0
0.0
0.0
0.0
0.0
0.0
Income from continuing operations
2.2
2.2
0.0
3.4
3.2
0.1
Provision for/(benefit from) income taxes from continuing ops.
0.3
0.4
(0.1)
0.5
0.5
0.0
Pre-tax income from continuing operations (GAAP)
2.5
2.6
(0.1)
3.9
3.8
0.1
Non-operating adjustments (before tax)
Acquisition-related charges (1)
0.7
0.6
0.1
1.4
1.1
0.2
Non-operating retirement-related costs/(income)
0.1
0.0
0.1
0.2
0.0
0.1
Operating (non-GAAP) pre-tax income from continuing ops.
3.3
3.2
0.1
5.4
4.9
0.5
Net interest expense
0.4
0.3
0.1
0.7
0.6
0.1
Depreciation/amortization of non-acquired intangible assets
0.7
0.7
0.0
1.4
1.4
0.0
Stock-based compensation
0.5
0.4
0.1
1.0
0.8
0.2
Workforce rebalancing charges
0.0
0.0
0.0
0.4
0.3
0.0
Corporate (gains) and charges (2)
(0.1)
0.0
(0.1)
(0.1)
0.0
(0.1)
Adjusted EBITDA
$ 4.8
$ 4.7
$ 0.1
$ 8.8
$ 8.1
$ 0.7
Revenue
$ 17.2
$ 17.0
1 %
$ 33.1
$ 31.5
5 %
GAAP net income margin
12.6 %
12.9 %
(0.3)pts
10.2 %
10.3 %
(0.1)pts
Adjusted EBITDA margin
27.8 %
27.6 %
0.2pts
26.5 %
25.7 %
0.8pts
___________________
(1) Primarily consists of amortization of acquired intangible assets.
(2) Primarily consists of unique corporate actions such as gains on divestitures and asset sales.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Three Months Ended June 30, 2026
($ in millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 7,761
$ 5,327
$ 3,835
$ 186
Segment profit
$ 2,502
$ 647
$ 835
$ 108
Segment profit margin
32.2
%
12.1
%
21.8
%
58.0
%
Change YTY revenue
5.1
%
0.2
%
(7.4)
%
12.2
%
Change YTY revenue – constant currency
4.6
%
1.1
%
(7.4)
%
11.3
%
Three Months Ended June 30, 2025
($ in millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 7,387
$ 5,314
$ 4,142
$ 166
Segment profit
$ 2,296
$ 562
$ 965
$ 179
Segment profit margin
31.1
%
10.6
%
23.3
%
107.9
%
Six Months Ended June 30, 2026
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 14,813
$ 10,599
$ 7,161
$ 406
Segment Profit
$ 4,601
$ 1,205
$ 1,360
$ 226
Segment Profit Margin
31.1
%
11.4
%
19.0
%
55.8
%
Change YTY Revenue
7.9
%
2.1
%
1.9
%
13.6
%
Change YTY Revenue – Constant Currency
6.1
%
1.0
%
0.5
%
10.7
%
Six Months Ended June 30, 2025
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 13,722
$ 10,382
$ 7,027
$ 357
Segment Profit
$ 4,143
$ 1,121
$ 1,213
$ 248
Segment Profit Margin
30.2
%
10.8
%
17.3
%
69.3
%
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; $ in millions except per share amounts)
Three Months Ended June 30, 2026
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross profit
$ 9,907
$ 287
$ —
$ —
$ 10,194
Gross profit margin
57.7
%
1.7
pts
—
pts
—
pts
59.4
%
SG&A
$ 4,981
$ (421)
$ —
$ —
$ 4,560
Other (income) & expense
(185)
1
(96)
—
(280)
Total expense & other (income)
7,428
(429)
(96)
—
6,903
Pre-tax income from continuing operations
2,479
716
96
—
3,290
Pre-tax income margin from continuing
operations
14.4
%
4.2
pts
0.6
pts
—
pts
19.2
%
Provision for/(benefit from) income taxes (3)
$ 313
$ 167
$ 20
$ (2)
$ 498
Effective tax rate
12.6
%
2.3
pts
0.2
pts
(0.1)
pts
15.1
%
Income from continuing operations
$ 2,166
$ 548
$ 76
$ 2
$ 2,792
Income margin from continuing operations
12.6
%
3.2
pts
0.4
pts
0.0
pts
16.3
%
Diluted earnings per share: continuing
operations
$ 2.27
$ 0.58
$ 0.08
$ 0.00
$ 2.93
Three Months Ended June 30, 2025
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross profit
$ 9,977
$ 225
$ —
$ —
$ 10,202
Gross profit margin
58.8
%
1.3
pts
—
pts
—
pts
60.1
%
SG&A
$ 5,027
$ (348)
$ —
$ —
$ 4,679
Other (income) & expense
(39)
(1)
(25)
—
(65)
Total expense & other (income)
7,380
(350)
(25)
—
7,005
Pre-tax income from continuing operations
2,597
575
25
—
3,197
Pre-tax income margin from continuing
operations
15.3
%
3.4
pts
0.1
pts
—
pts
18.8
%
Provision for/(benefit from) income taxes (3)
$ 404
$ 132
$ 9
$ —
$ 545
Effective tax rate
15.5
%
1.3
pts
0.2
pts
—
pts
17.0
%
Income from continuing operations
$ 2,193
$ 443
$ 17
$ —
$ 2,652
Income margin from continuing operations
12.9
%
2.6
pts
0.1
pts
—
pts
15.6
%
Diluted earnings per share: continuing
operations
$ 2.31
$ 0.47
$ 0.02
$ —
$ 2.80
____________________
(1) Includes amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction
costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as
financing costs.
(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan
curtailments/settlements and pension insolvency costs and other costs.
(3) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to
the GAAP pre-tax income.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; $ in millions except per share amounts)
Six Months Ended June 30, 2026
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross Profit
$ 18,857
$ 524
$ —
$ —
$ 19,380
Gross Profit Margin
57.0
%
1.6
pts
—
pts
—
pts
58.6
%
SG&A
$ 10,071
$ (829)
$ —
$ —
$ 9,242
Other (Income) & Expense
(186)
1
(192)
—
(378)
Total Expense & Other (Income)
14,991
(838)
(192)
—
13,961
Pre-tax Income from Continuing Operations
3,866
1,361
192
—
5,419
Pre-tax Income Margin from Continuing
Operations
11.7
%
4.1
pts
0.6
pts
—
pts
16.4
%
Provision for/(Benefit from) Income Taxes (3)
$ 484
$ 305
$ 23
$ (6)
$ 806
Effective Tax Rate
12.5
%
2.5
pts
0.0
pts
(0.1)
pts
14.9
%
Income from Continuing Operations
$ 3,382
$ 1,056
$ 169
$ 6
$ 4,613
Income Margin from Continuing Operations
10.2
%
3.2
pts
0.5
pts
0.0
pts
13.9
%
Diluted Earnings Per Share: Continuing
Operations
$ 3.55
$ 1.11
$ 0.18
$ 0.01
$ 4.84
Six Months Ended June 30, 2025
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross Profit
$ 18,008
$ 426
$ —
$ —
$ 18,434
Gross Profit Margin
57.1
%
1.4
pts
—
pts
—
pts
58.5
%
SG&A
$ 9,913
$ (701)
$ —
$ —
$ 9,212
Other (Income) & Expense
(204)
(1)
(48)
—
(253)
Total Expense & Other (Income)
14,253
(706)
(48)
—
13,499
Pre-tax Income from Continuing Operations
3,755
1,132
48
—
4,935
Pre-tax Income Margin from Continuing
Operations
11.9
%
3.6
pts
0.2
pts
—
pts
15.7
%
Provision for/(Benefit from) Income Taxes (3)
$ 507
$ 260
$ (3)
$ 2
$ 766
Effective Tax Rate
13.5
%
2.2
pts
(0.2)
pts
0.0
pts
15.5
%
Income from Continuing Operations
$ 3,248
$ 872
$ 51
$ (2)
$ 4,169
Income Margin from Continuing Operations
10.3
%
2.8
pts
0.2
pts
0.0
pts
13.2
%
Diluted Earnings Per Share: Continuing
Operations
$ 3.43
$ 0.92
$ 0.05
$ 0.00
$ 4.40
____________________
(1) Includes amortization of acquired intangible assets, and acquisition-related charges such as in-process research and development, transaction
costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as
financing costs.
(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan
curtailments/settlements and pension insolvency costs and other costs.
(3) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to
the GAAP pre-tax income.
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in millions)
2026
2025
2026
2025
Net cash provided by operating activities per GAAP
$ 2,597
$ 1,701
$ 7,766
$ 6,071
Less: change in IBM Financing receivables
(302)
(1,480)
2,264
606
Net cash from operating activities excl. IBM Financing receivables
2,899
3,182
5,503
5,465
Capital expenditures, net
(359)
(336)
(743)
(657)
Free cash flow
$ 2,540
$ 2,845
$ 4,760
$ 4,808
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in billions)
2026
2025
2026
2025
Net cash provided by operating activities
$ 2.6
$ 1.7
$ 7.8
$ 6.1
Add:
Net interest expense
0.4
0.3
0.7
0.6
Provision for/(benefit from) income taxes from continuing operations
0.3
0.4
0.5
0.5
Less change in:
Financing receivables
(0.3)
(1.5)
2.3
0.6
Net (gain)/loss on divestitures, assets sales and other (1)
(0.1)
0.0
(0.1)
0.0
Other assets and liabilities/other, net (1,2)
(1.1)
(0.7)
(2.0)
(1.5)
Adjusted EBITDA
$ 4.8
$ 4.7
$ 8.8
$ 8.1
Revenue
$ 17.2
$ 17.0
$ 33.1
$ 31.5
Net cash provided by operating activities margin
15.1 %
10.0 %
23.5 %
19.3 %
Adjusted EBITDA margin
27.8 %
27.6 %
26.5 %
25.7 %
____________________
(1) Reclassified to align with the presentation of similar line items in the Statement of Cash Flows.
(2) Mainly consists of Changes in operating assets and liabilities, net of acquisitions/divestitures in the Statement of Cash Flows chart,
workforce rebalancing charges, non-operating impacts, and corporate (gains) and charges, less the change in Financing receivables.