ARMONK, N.Y., July 14, 2026 /PRNewswire/ --
IBM Investors –
This morning we are releasing selected preliminary second-quarter 2026 financial results. We are still working to close our financial reporting for the quarter and our final results could be slightly different.
For the second quarter:
Revenue:
- Revenue of $17.2 billion, up 1 percent
- Software revenue up 5 percent
- Consulting revenue flat, up 1 percent at constant currency
- Infrastructure revenue down 7 percent
Profit:
- Gross Profit Margin: GAAP: 57.7 percent, down 100 basis points; Operating (Non-GAAP): 59.4 percent, down 70 basis points
- Pre-Tax Income Margin: GAAP: 14.4 percent, down 90 basis points; Operating (Non-GAAP): 19.2 percent, up 30 basis points
Cash Flow:
- Year to date, net cash from operating activities of $7.8 billion; free cash flow of $4.8 billion
EPS:
- Diluted Earnings Per Share: GAAP: $2.27, down 2 percent; Operating (Non-GAAP): $2.93, up 5 percent
I want to spend some time explaining what we experienced in the quarter that led to the Software and Infrastructure performance shortfall you see above.
When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter. Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter. What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.