# IBM Shares Drop 6.5% Despite Q3 Beat and Higher Free Cash Flow Outlook By John Kim Canonical URL: https://www.tokenpost.com/news/business/38177 Published: 2026-10-22T18:13:21.000Z Updated: 2026-10-22T18:13:21.000Z Section: Business > Software revenue rose 8% as IBM lifted its 2026 software growth range; some transaction-processing revenue came from deals delayed from the second quarter. IBM shares fell 6.5% in premarket trading Thursday after the company beat third-quarter estimates and raised its free-cash-flow outlook, though some transaction-processing revenue came from deals delayed from the previous quarter. The decline followed a 3.96% gain Wednesday, when shares closed at $251.49. For the quarter ended Sept. 30, IBM booked $17.103 billion in revenue, 5% more than a year earlier and 6% higher after currency effects are excluded. Operating non-GAAP diluted earnings were $2.95 per share, above the $2.86 estimate. Revenue also topped the $16.82 billion estimate. Software generated $7.804 billion, an 8% year-over-year increase. Transaction-processing revenue grew 9%. Infrastructure revenue rose 4% to $3.707 billion, while consulting was flat at $5.335 billion. IBM Z revenue fell 20%. IBM Chief Financial Officer James Kavanaugh said about one-quarter of transaction-processing revenue came from deals postponed from the second quarter, with the rest from new business. He narrowed IBM’s projected 2026 software revenue growth to about 7%–8%; the previous range was 6%–8%. IBM Chairman, President and CEO Arvind Krishna described transaction-processing growth as “normalized performance, especially going into next year.” IBM now expects 2026 free cash flow to rise by more than $1 billion year over year, compared with its previous target of about $1 billion. Third-quarter free cash flow was $3.027 billion, up from $2.373 billion a year earlier. The company kept its full-year constant-currency revenue growth forecast at 4% to 5%. In July, IBM cut its 2026 constant-currency revenue growth outlook to 4% to 5% as customers shifted spending toward servers, storage and memory and some large deals missed expected closing dates. Software revenue grew 5% in the second quarter, while infrastructure revenue fell 7%. The earlier [review of IBM’s software-growth outlook]() covered that uneven backdrop. ## Links in this article - [review of IBM’s software-growth outlook](https://www.tokenpost.com/news/business/36218)