International Business Machines Corp (NYSE:IBM) reported first-quarter 2026 results that beat Wall Street expectations on both revenue and earnings, driven by strength in software and infrastructure, though shares fell more than 8% in after-hours trading as investors weighed mixed signals in consulting and forward guidance.
The technology and consulting company posted revenue of $15.92 billion, above analyst estimates of $15.61 billion, and up 9% year over year.
Adjusted earnings per share came in at $1.91, ahead of expectations of $1.81, and up 19% from a year earlier.
Software remained a key growth engine, rising 11% to $7.05 billion, slightly ahead of expectations. Infrastructure revenue climbed 15% to $3.3 billion, underscoring continued demand across hybrid cloud and enterprise systems.
However, consulting revenue came in slightly below expectations at $5.27 billion versus $5.29 billion estimated, though it still grew 4% year over year, suggesting steady but moderating demand in advisory services.
Profitability trends improved during the quarter. Operating gross margin expanded to 57.7%, up 110 basis points from a year earlier, while operating pre-tax income margin rose to 13.4%, an increase of 140 basis points. Net income climbed 15% to $1.2 billion.
Free cash flow reached $2.22 billion, topping estimates of $2.17 billion and increasing by $300 million year over year, supported by improved earnings quality and working capital dynamics. IBM also ended the quarter with $11.8 billion in cash, restricted cash, and marketable securities, against $66.4 billion in debt.
For the full year, IBM reaffirmed expectations for more than 5% revenue growth in constant currency, in line with analyst forecasts of 5.1%.
Despite the beat-and-raise tone in several key metrics, IBM shares fell sharply in after-hours trading, as investors focused on the mixed consulting performance and broader concerns about the durability of growth in enterprise technology spending.