IBM Beats Q3 Expectations as Software Revenue Rises 8%, AI-Related Consulting Reaches 30%

IBM reported its fiscal 2026 third-quarter earnings after the market close on October 21, 2026, beating Wall Street expectations on both revenue and adjusted earnings per share. Total revenue reached $17.103 billion, up 5% year over year, with adjusted EPS of $2.95, up 11%.

Software led growth with revenue of $7.804 billion, up 8% year over year, accounting for roughly 46% of total revenue. CFO James Kavanaugh said the company raised its full-year software revenue growth guidance to 7%-8%, up from the previous 6%-8% range. Consulting revenue was $5.335 billion, roughly flat compared with a year ago, with AI-related work contributing about 30% of consulting revenue and 35% of the consulting backlog.

Net income rose to $2.19 billion from $1.74 billion in the same period last year. IBM also lifted its full-year free cash flow growth guidance to more than $1 billion, while maintaining its full-year revenue growth outlook of 4%-5%.

CEO Arvind Krishna said customers are using "superintelligence" to transform their entire operating models. Barclays analyst Raimo Lenschow said the results should help move past last quarter's "hiccup" and reiterated an overweight rating on the stock.