IBM Beats Estimates as Delayed Deals Lift Software Revenue 8%

IBM’s third-quarter software revenue rose 8% to $7.8 billion, helping the company top Wall Street’s earnings and revenue estimates as delayed deals from the second quarter lifted sequential growth.

Operating earnings were $2.95 per share, excluding certain items, above the $2.86 estimate. Revenue reached $17.1 billion, up 5% from a year earlier and ahead of the $16.82 billion estimate. Net income was $2.19 billion, compared with $1.74 billion a year earlier.

Software revenue growth was 9% after adjusting for currency movements. Data revenue rose 19%, and Red Hat’s hybrid cloud business grew 11%; automation revenue declined 3%. IBM entered the quarter after software revenue grew 5% to $7.8 billion in the second quarter, TP revenue fell 8% and several deals missed expected closing dates, as described in the second-quarter results preview.

IBM Chief Financial Officer James Kavanaugh said roughly $250 million in business delayed from the second quarter contributed about one-quarter of a four-percentage-point acceleration in software’s sequential growth.

Transaction Processing (TP) revenue, from software tied to IBM mainframes, rose 9% after falling 8% in the second quarter. Kavanaugh cautioned against expecting double-digit TP performance to continue. “I don't expect double-digit performance in TP to keep going,” he said.

Consulting revenue was flat at $5.3 billion, while infrastructure revenue increased 4% to $3.7 billion. IBM kept its 2026 revenue growth forecast at 4% to 5% at constant currency, which excludes the effect of exchange-rate movements. IBM now expects free cash flow to increase by more than $1 billion from 2025. It also projects software revenue growth of about 7% to 8% for 2026, with 7% as its base case.