IBM CEO Arvind Krishna attends a Diwali celebration in the Oval Office of the White House on October 21, 2025 in Washington.
Alison Robert | Alison Robert Bloomberg | Getty Images
IBM Shares fell 6% in after-hours trading Wednesday after the hardware, software and consulting company reported better-than-expected first-quarter results but maintained its full-year outlook.
Here’s how the company performed compared to the LSEG consensus:
Earnings per share: $1.91 adjusted vs. $1.81 expected Revenue: $15.92 billion vs. $15.62 billion expected
IBM’s revenue for the quarter increased 9% from a year earlier, the statement said. Net income was $1.22 billion ($1.28 per share), up from $1.06 billion ($1.12 per share) in the fourth quarter of 2024. Adjusted earnings do not include acquisition-related adjustments.
Management reiterated its outlook for 2026, including revenue growth of more than 5% and free cash flow growth of $1 billion, excluding the impact of currency fluctuations.
“I don’t think we’ve ever raised our guidance for the first quarter,” Jim Kavanaugh, IBM’s finance chief, told analysts on a conference call. He said executives believe the company should be a “smart operator.”
The war between the United States and Iran broke out on February 28th. IBM posted its strongest revenue growth in decades in the Middle East through the quarter, CEO Arvind Krishna said on a conference call.
“The developments in the Middle East did not impact the first quarter,” Krishna said. “While uncertainty remains, our diversity across businesses, geographies, industries and large enterprise customers positions us well.”
IBM’s first-quarter software revenue rose 11% to $7.05 billion, beating the $7.02 billion consensus of analysts surveyed by StreetAccount.
IBM Finance Director Jim Kavanaugh said Red Hat Enterprise Linux revenue growth, driven by IBM’s $34 billion acquisition of Red Hat in 2019, has slowed since the fourth quarter.
“I think this is due to the lack of federal signatures and the government shutdown in the fourth quarter, but I also think it’s because the hardware supply chain is so disrupted,” Kavanaugh said.
Management is focused on supply chain implications for Red Hat Enterprise Linux.
“RHEL is tied to the entire enterprise hardware deployment,” Kavanaugh said.
Consulting revenue rose 4% to $5.27 billion, slightly missing the Street consensus of $5.28 billion.
Infrastructure rose 15% to $3.33 billion, beating the StreetAccount consensus of $3.16 billion. IBM said its z17 mainframe models continued to outperform previous cycles, with Z mainframe hardware revenue increasing 51%.
As of Wednesday’s close, IBM shares were down about 15% so far in 2026, compared with a 4% rise in the S&P 500 index over the same period.
In February, shares of artificial intelligence model-building company Anthropic fell 13% in one day after the company announced that AI could help companies modernize code written in the COBOL programming language. Applications written in COBOL can run on IBM mainframe computers. “AI strengthens the mainframe case, not weakens it,” Rob Thomas, IBM’s senior vice president of software, wrote in a LinkedIn post.
In mid-March, IBM completed its $11 billion acquisition of data streaming software company Confluent. Despite closing the Confluent deal about two months earlier than expected, IBM now expects pretax operating margins to expand by about 1%, Kavanaugh said.
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