01—Abstract
Summary
Summary of the 10-Q filed July 23, 2026. Cited figures are marked; the original filing is the authoritative source.
IBM's Q2 2026 filing indicates a slight increase in total revenue to $17.16 billiona, up 1.1% year-over-year, with revenue adjusted for currency also showing a 1.1% increase.
Net income from continuing operations was $2.166 billionb, a marginal decrease of 1.2% from the prior year. The company reported a significant increase in operating (non-GAAP) earnings, up 5.3% to $2.79 billion, and a 4.6% increase in diluted operating EPS to $2.93. Despite overall revenue growth, the Infrastructure segment experienced a notable decline of 7.4%, primarily due to weaker-than-expected performance in IBM Z and its associated software, which was impacted by a shift in client spending priorities in late June towards supply-constrained hardware.
Key strategic initiatives appear to be driving growth in certain segments, with Software revenue increasing by 5.1%c (4.6% adjusted for currency) and Consulting revenue showing modest growth of 0.2% (1.1% adjusted for currency). The company completed the acquisition of Confluent in Q1 2026, which is contributing to Software revenue growth, particularly in Hybrid Cloud and Data. IBM continues to invest heavily in Research and Development, with a 10.2% increase in R&D expenses for the quarter, focusing on AI, hybrid cloud, and quantum computing.
The company's balance sheet remains strong, with total assets at $152.1 billiond and total equity at $34.5 billion, though working capital decreased significantly due to the Confluent acquisition and other factors. Free cash flow for the first six months was $4.8 billion, remaining stable year-over-year.
02—Key points
Key Highlights
- Total revenue increased by 1.1% to $17.16 billion for the three months ended June 30, 2026, compared to the prior year, with currency adjustments showing a similar 1.1% growth.
- Software segment revenue grew by 5.1% to $7.76 billion, driven by Hybrid Cloud and Data, with annual recurring revenue reaching $24.6 billion.
- Infrastructure segment revenue declined by 7.4% to $3.84 billion, primarily due to a shortfall in IBM Z performance and a shift in client spending priorities.
- Operating (non-GAAP) earnings increased by 5.3% to $2.79 billion, and diluted operating EPS rose by 4.6% to $2.93, indicating strong underlying operational performance.
- Research and Development expenses increased by 10.2% to $2.31 billion for the quarter, reflecting continued investment in AI, hybrid cloud, and quantum technologies.
- The company completed the acquisition of Confluent in Q1 2026, which is contributing to Software segment growth, particularly in Hybrid Cloud and Data.
- Free cash flow for the six months ended June 30, 2026, was $4.8 billion, remaining stable year-over-year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, International Business Machines Corp kept $0.13.
- Revenue$17.16B100.0%
- Cost of revenue−$7.25B42.3%
- Gross profit$9.91B57.7%
- Operating costs−$6.53B38.0%
- Operating income$3.38B19.7%
- Interest, other & tax−$1.22B7.1%
- Net income$2.17B12.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed July 23, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $17.16B$16.98B | +1.1% |
| Cost of Revenue | $7.25B$7.00B | +3.6% |
| Gross Profit | $9.91B$9.98B | −0.7% |
| R&D Expenses | $2.31B$2.10B | +10.2% |
| SG&A Expenses | $4.98B$5.03B | −0.9% |
| Operating Income | $3.38B$3.25B | +4.1% |
| Interest Expense | $486.00M$510.00M | −4.7% |
| Net Income | $2.17B$2.19B | −1.3% |
| EPS (Basic) | $2.30$2.36 | −2.5% |
| EPS (Diluted) | $2.27$2.31 | −1.7% |
| Shares Outstanding (Basic) | 941.19M930.81M | +1.1% |
| Shares Outstanding (Diluted) | 953.26M947.96M | +0.6% |
05—Questions
Frequently Asked Questions
What was the overall revenue performance for IBM in the second quarter of 2026?
IBM reported a total revenue of $17.16 billion for the second quarter of 2026, representing a 1.1% increase compared to the same period in the prior year. Revenue growth adjusted for currency was also 1.1%.
How did the different business segments perform in terms of revenue?
The Software segment showed robust growth of 5.1% (4.6% adjusted for currency), reaching $7.76 billion. Consulting revenue grew slightly by 0.2% (1.1% adjusted for currency) to $5.33 billion. However, the Infrastructure segment experienced a significant decline of 7.4% to $3.84 billion, primarily due to weaker-than-expected performance in IBM Z and associated software.
What is the company's outlook regarding AI and Hybrid Cloud, and how is it impacting the business?
IBM views AI and Hybrid Cloud as transformative technologies. The company is investing in its watsonx AI platform and sees Infrastructure, particularly IBM Z, playing a critical role in AI acceleration. The acquisition of Confluent is expected to enhance capabilities in AI deployment by improving data flow and communication between environments. These strategic priorities are driving growth in the Software segment and influencing product development across the company.
What is the company's financial position and cash flow generation?
IBM maintains a strong financial position with total assets of $152.1 billion and total equity of $34.5 billion as of June 30, 2026. For the first six months of 2026, the company generated $7.8 billion in cash from operating activities and $4.8 billion in free cash flow, which was stable year-over-year. The company also returned $3.2 billion to shareholders through dividends in the first six months of 2026.
06—Continue