- Company name
- IBM
- Sector
- IT software & services
- About
- IBM sells software, consulting and computing infrastructure to large companies and governments. Software, its largest segment, includes Red Hat hybrid cloud software, automation, data and AI products, and transaction processing software for mainframes. Consulting helps clients with strategy, technology and operations. Infrastructure includes IBM Z mainframes, distributed servers and storage, and support. IBM bought Confluent, a data streaming company, in March 2026. Revenue was $67.5 billion in 2025 and $50.2 billion in the first nine months of 2026, when Software was 45% of revenue. IBM has paid a dividend every quarter since 1916.
- Thesis
- IBM trades at a premium because investors pay for its shift to software and for steady free cash flow. Software grew 8% in Q3 2026, with Red Hat up 11% and Data up 19%. Free cash flow was $14.7 billion in 2025, and IBM now expects more than $1 billion more in 2026. Investors also pay for a part in AI and for its quantum computing plan, with a target of a large-scale fault-tolerant quantum computer by 2029. For the premium to be earned, three things must be true. Software must keep growing near 10% a year, with help from Confluent, which IBM bought for about $11.3 billion in March 2026. Consulting must return to growth, after it was flat in Q2 and Q3 2026. Free cash flow must keep growing, so that IBM can pay its dividend and lower its debt of $63.8 billion. IBM Quantum Day on December 10, 2026 shows progress on the quantum plan, and the Q4 2026 report with the 2027 outlook, expected in late January 2027, is the next test. The premium can shrink if growth slows again, as in Q2 2026, when large deals did not close on time and IBM lowered its 2026 revenue growth outlook to 4% to 5% from more than 5%.
- Risks
- Software growth drives the value of IBM. In Q2 2026, large deals did not close on time and IBM lowered its revenue outlook. Automation software fell 3% in Q3 2026. If software growth slows again, earnings and cash flow growth slow.
Consulting was flat in Q2 and Q3 2026, with a gross margin of 27.9% in the first nine months of 2026. AI tools can lower the demand for consulting work that people do.
Debt was $63.8 billion at September 30, 2026, after the Confluent purchase. Long-term debt of $6.7 billion is due in 2027 and $6.0 billion in 2028. Higher interest rates make refinancing more costly.
IBM plans to invest more than $10 billion over five years in quantum computing. The technology may take longer to earn revenue than IBM expects.
IBM Z sales move in product cycles. IBM Z revenue fell 20% in Q3 2026 against a strong year earlier, and it can fall more before the next system.
- Balance sheet
- Cash: $11.1B
Debt: $63.8B
Net debt: $52.7B
Interest cover: 5.4×
Undrawn credit line: $10.0B
Debt due within 12 months: $7.0B
IBM funds itself mainly with long-term notes in U.S. dollars, euros and other currencies. Total debt was $63.8 billion at September 30, 2026, up $2.6 billion in 2026 after the purchase of Confluent for about $11.3 billion in March 2026. Of this debt, $12.7 billion supports IBM Financing, which lends to clients, so the debt of the rest of IBM was about $51.1 billion. Short-term debt was $7.0 billion. Cash is cash, restricted cash and marketable securities of $11.1 billion. Long-term debt of $6.7 billion is due in 2027 and $6.0 billion in 2028. In 2026, IBM sold $3.25 billion and 3.5 billion euros of notes in January and C$2.75 billion of notes in August. Its $2.5 billion and $7.5 billion revolving credit facilities, which run to June 2029 and June 2031, were undrawn. Interest cover is pre-tax income plus interest expense, divided by interest expense, for the first nine months of 2026. Free cash flow was $7.8 billion in the first nine months of 2026, and IBM paid $4.8 billion of dividends in that period. It bought back shares only for tax withholdings.
As of 2026-09-30.
- Checkpoints
- Dec 10, 2026: IBM Quantum Day 2026. Pending. Watch: Clear progress toward a large-scale fault-tolerant quantum computer by 2029 passes; a delay of the 2029 target fails.
Jan 27, 2027 (estimate): Q4 2026 results and 2027 outlook. Pending. Watch: 2026 free cash flow above $15.7 billion, software growth near 10% and a 2027 outlook for higher revenue and free cash flow pass; slower software growth or a weaker outlook fail.
- Recent events
- 2026-10-21: IBM reported Q3 2026 results. Revenue grew 5% to $17.1 billion. Software grew 8%, Consulting was flat and Infrastructure grew 4%, with IBM Z down 20%. Operating EPS was $2.95, up 11%. IBM kept its outlook for constant currency revenue growth of 4% to 5% in 2026 and now expects free cash flow to rise by more than $1 billion.
2026-09-14: Anderon, an IBM subsidiary for quantum chip manufacturing, signed an award of up to $1.0 billion from the U.S. Department of Commerce under the CHIPS Act. IBM put $1.0 billion of cash into Anderon, and the Department received a minority equity interest.
2026-08-10: IBM sold C$2.75 billion of notes: C$1.75 billion of 4.100% notes due 2030 and C$1.0 billion of 4.750% notes due 2034.
2026-07-22: IBM reported Q2 2026 results. Revenue grew 1% to $17.2 billion, Software grew 5% and Infrastructure fell 7%. Operating EPS was $2.93, up 5%. IBM lowered its 2026 outlook to constant currency revenue growth of 4% to 5% from more than 5%, and kept its outlook for free cash flow growth of about $1 billion.
2026-07-14: IBM gave preliminary Q2 2026 results that were below its plan. It said that large deals did not close on time and that IBM Z and its software stack fell short, mainly in Transaction Processing. The CEO wrote that IBM did not adapt and move quickly enough.
2026-05-28: IBM said that it plans to invest more than $10 billion over five years in quantum computing, and it confirmed its target of a large-scale fault-tolerant quantum computer by 2029.
2026-04-22: IBM reported Q1 2026 results. Revenue grew 9% to $15.9 billion, Software grew 11% and operating EPS was $1.91, up 19%.
2026-03-17: IBM completed the purchase of Confluent for $31 per share in cash, an equity value of about $11.3 billion.
2026-01-28: IBM reported 2025 results. Revenue grew 8% to $67.5 billion, free cash flow was $14.7 billion and operating EPS was $11.59. IBM said that its generative AI book of business was more than $12.5 billion. It expected constant currency revenue growth of more than 5% in 2026.