IBM reported third-quarter results that exceeded analyst expectations, with shares rising in extended trading on Wednesday. The technology vendor's net income climbed to $2.19 billion, or $2.30 per share, up from $1.74 billion, or $1.84 per share, in the same period last year.
Revenue grew approximately 5% year over year. IBM CEO Arvind Krishna stated that clients are now deploying "Super Intelligence" to transform entire operating models rather than addressing narrow problems. The company's adjusted earnings figures exclude acquisition-related adjustments.
Segment performance showed strength in software and infrastructure. Software revenue reached $7.80 billion, an 8% increase that surpassed the $7.66 billion consensus from StreetAccount. Infrastructure revenue rose 4% to $3.70 billion, outperforming the $3.57 billion analyst expectation. Consulting revenue remained flat at $5.34 billion, falling slightly short of the $5.37 billion consensus.
Despite the top-line growth, the company's adjusted gross margin narrowed to 58.5%, compared with the StreetAccount consensus of 59.1%. Looking ahead, IBM raised its full-year free cash flow guidance to an increase of more than $1 billion, up from a previous forecast of approximately $1 billion as of July. The company maintains its outlook for 2026 constant-currency revenue growth between 4% and 5%.
IBM also announced an agreement to acquire HRL Laboratories, a research division formerly associated with Hughes Aircraft and currently owned by Boeing and General Motors, for an undisclosed sum. The acquisition follows IBM's earlier investments in quantum computing, where executives have projected significant value creation by the end of the 2030s.
As of Wednesday's close, IBM stock had declined 15% over the year, contrasting with a 13% gain for the S&P 500 index. Executives are scheduled to discuss the results with analysts on a conference call beginning at 5 p.m. ET.