International Business Machines (IBM) — Company Research

Last Updated: 31 Oct 2026

International Business Machines (NYSE: IBM) is a hybrid-cloud, AI and infrastructure company. It earns most of its profit from software (Red Hat, automation, data and transaction processing), alongside IT consulting and IBM Z mainframe and Power systems. FY2025 revenue rose 7.6% to $67.5bn, operating EPS was $11.59 and IBM-defined free cash flow was $14.7bn. 2026 has been uneven. IBM warned on 14 Jul 2026 that Q2 had fallen short, as large deals slipped and mainframe sales dropped, and cut its constant-currency growth outlook to 4–5%. Q3 2026 then showed revenue up 5% to $17.10bn, software up 8% and operating EPS up 11% to $2.95, and IBM raised its free cash flow outlook. Since the last version of this report (17 Jun 2026) IBM has reported Q2 and Q3 2026, completed the HRL Laboratories acquisition, agreed a partnership with OpenAI and been selected for Stage C of DARPA’s Quantum Benchmarking Initiative. All figures come from IBM’s earnings releases and SEC filings. There are no analyst opinions, price targets or ratings in this report.

1. Company Snapshot

Field	Value
Ticker / Exchange	IBM / NYSE
CEO / Leadership	Arvind Krishna, Chairman, President and CEO; James Kavanaugh, SVP Finance & Operations and CFO; Gary Cohn, Vice Chairman; Rob Thomas, SVP Software and Chief Commercial Officer
Sector	Technology — software, IT consulting and enterprise infrastructure
Headquarters	Armonk, New York
Employees	~264,300 at IBM and wholly owned subsidiaries at 31 Dec 2025 (2025 Annual Report)
Market cap	~$243.7bn ($257.81 at 30 Oct 2026 close × 945.12m shares per the Q3 2026 10-Q cover)
FY2025 Revenue	$67,535m (+7.6%; +6% at constant currency)
FY2025 earnings	GAAP diluted EPS from continuing operations $11.14 (including a tax-audit benefit); operating (non-GAAP) EPS $11.59; net income ~$10.6bn
Q3 2026	Revenue $17,103m (+5%); GAAP EPS $2.31; operating EPS $2.95; free cash flow $3,027m
Dividend	$1.69 quarterly ($6.76 annualised), the 31st consecutive annual increase; ~2.6% yield at $257.81

2. Bull & Bear Case

Bull Case

• Software growth back on track: Q3 2026 software revenue rose 8.2% to $7.80bn, with Red Hat up 11% and Data up 19% helped by Confluent. Software was 45.6% of Q3 revenue.
• Strong and rising cash generation: IBM-defined free cash flow was $14.7bn in FY2025 and $7.8bn in the first nine months of 2026, and IBM now expects 2026 free cash flow to grow by more than $1bn.
• Long dividend record: The quarterly dividend was raised to $1.69 in Apr 2026, the 31st consecutive annual increase.
• Quantum leadership: IBM committed more than $10bn to quantum computing over five years, was selected for Stage C of DARPA’s Quantum Benchmarking Initiative and says its Starling fault-tolerant system remains on track for 2029.
• Profitability improving: Q3 2026 operating pre-tax margin rose 70 basis points to 19.3%, and operating EPS rose 11% to $2.95.

Bear Case

• Q2 shortfall and lower outlook: On 14 Jul 2026 IBM said Q2 had fallen short as large deals slipped and clients moved spending to servers and memory, and it cut 2026 growth guidance to 4–5% at constant currency. The shares hit a 52-week low of $199.19 on 23 Jul 2026.
• Consulting stalled: Consulting revenue was flat in Q2 2026 and up only 0.2% in Q3 2026.
• Mainframe cycle turning: IBM Z revenue fell 42% in Q2 2026 and 20% in Q3 2026 as the z17 cycle laps its strong launch.
• Debt has risen: Total debt was $63.8bn at 30 Sep 2026, including $12.7bn of Financing debt, after the $11.6bn Confluent acquisition. Goodwill stood at $74.9bn.
• AI return questions: Coverage of the Q3 2026 call reported that clients are questioning the return on AI spending, and the shares fell in intraday trading on 22 Oct 2026.

3. Business Segments

IBM reports four segments. Percentages use FY2025 revenue of $67,535m; the remaining ~0.1% is other revenue.

Segment	% of revenue	What it is
Software	44.4% ($29,962m)	Hybrid cloud (Red Hat), automation (including HashiCorp), data (including Confluent from Mar 2026) and transaction processing software. Q3 2026 revenue $7,804m (+8.2%).
Consulting	31.2% ($21,055m)	Strategy, technology and AI consulting and intelligent operations. Q3 2026 revenue $5,335m (+0.2%).
Infrastructure	23.3% ($15,718m)	IBM Z mainframes, Power servers, storage and infrastructure support. Q3 2026 revenue $3,707m (+4.2%); IBM Z −20%, distributed infrastructure +31%.
Financing	1.1% ($737m)	Client and commercial financing for IBM hardware, software and services. Q3 2026 revenue $192m (−3.9%).

4. Business Model & Moat

How it makes money. IBM sells software subscriptions and support, consulting projects and outsourcing, and mainframe and server systems to large companies and governments. Software carries the highest margins, and IBM’s Q3 2026 operating gross margin was 58.5%.

Switching costs. Banks, insurers, airlines and governments run core transaction systems on IBM Z mainframes and related software. Moving those systems is costly and risky, which supports recurring software, support and upgrade revenue over many years.

Hybrid cloud platform. Red Hat OpenShift and Linux let clients run applications across their own data centres and public clouds. IBM builds its automation (HashiCorp), data (Confluent, watsonx) and AI products on top of that platform and sells them with its consultants.

Research and patents. IBM spent $8.3bn on research and development in FY2025. Its research arm underpins its quantum computing, semiconductor and AI work.

5. Financial Health

Annual figures are from IBM’s Q4 earnings releases and SEC XBRL filings. Adjusted EPS is IBM’s operating (non-GAAP) EPS. Long-term debt is the non-current amount on the year-end balance sheet and includes IBM Financing debt.

Fiscal Year	Revenue ($m)	YoY %	GAAP EPS	Adjusted EPS	Dividend/share	Long-term debt (YE)
FY2021	$57,350m	+3.9%	$5.21	$7.93	$6.55	$44,917m
FY2022	$60,530m	+5.5%	$1.95	$9.13	$6.59	$46,189m
FY2023	$61,860m	+2.2%	$8.15	$9.62	$6.63	$50,121m
FY2024	$62,753m	+1.4%	$6.42	$10.33	$6.67	$49,884m
FY2025	$67,535m	+7.6%	$11.14	$11.59	$6.71	$54,836m

FY2021 revenue is restated for the Kyndryl separation, and growth is against FY2020 revenue of $55,179m on the same basis. GAAP EPS is from continuing operations; FY2022 includes a $5.9bn pension settlement charge and FY2025 a tax-audit benefit. Dividends are cash paid per share.

Quarterly progression, most recent first, with the FY2025 total in bold:

Quarter / Half	Revenue	Adjusted EPS	GAAP EPS
Q3 2026	$17,103m	$2.95	$2.31
Q2 2026	$17,162m	$2.93	$2.27
Q1 2026	$15,917m	$1.91	$1.28
Q4 2025	$19,686m	$4.52	$5.86
Q3 2025	$16,331m	$2.65	$1.84
Q2 2025	$16,977m	$2.80	$2.31
Q1 2025	$14,541m	$1.60	$1.12
FY2025 total	$67,535m	$11.59	$11.14

Over the four quarters to 30 Sep 2026, revenue was ~$69.9bn, GAAP EPS ~$11.73 and operating EPS ~$12.32. Q4 2025 GAAP EPS included a tax-audit benefit.

Cash flow and balance sheet. All figures are from SEC XBRL data and IBM’s earnings releases (FY2025 10-K and Q3 2026 10-Q).

• Operating cash flow: $13,193m in FY2025; $11,791m in the nine months to 30 Sep 2026; ~$15,831m trailing twelve months.
• Capital expenditure: payments for property, plant and equipment were $1,091m in FY2025 and $793m in the nine months to 30 Sep 2026, ~$1,175m trailing twelve months. IBM’s own free cash flow measure also deducts investment in software and excludes changes in Financing receivables: $14,734m in FY2025 and $7,787m in the nine months to 30 Sep 2026.
• Depreciation & amortisation: $5,021m in FY2025 (depreciation $2,284m plus intangible amortisation $2,737m); ~$5,297m trailing twelve months.
• Debt at 30 Sep 2026: short-term debt $7,013m and long-term debt $56,804m, ~$63,817m in total, of which ~$12.7bn supports IBM Financing.
• Cash at 30 Sep 2026: cash and equivalents $9,233m plus marketable securities $1,825m, ~$11,058m in total.

6. Valuation

Raw metrics, October 2026. Not opinions on whether the stock is cheap or expensive.

Metric	Value
Market cap	~$243.7bn (price $257.81 at 30 Oct 2026 close × 945.12m shares)
Enterprise value	~$296.4bn (market cap ~$243.7bn + total debt ~$63.8bn − cash and marketable securities ~$11.1bn per 30 Sep 2026 balance sheet). Total debt includes ~$12.7bn of Financing debt backed by client receivables
Trailing P/E (GAAP)	~22.0x (price $257.81 / TTM GAAP EPS from continuing operations ~$11.73, Q4 2025–Q3 2026). On TTM operating EPS of ~$12.32 the multiple is ~20.9x
P/E (forward)	n/m — IBM guides revenue growth and free cash flow, not EPS, and ChartsView does not use analyst estimates
P/S (TTM)	~3.49x ($243.7bn / TTM revenue ~$69.9bn)
EV/EBITDA (TTM)	~16.7x (EV ~$296.4bn / TTM EBITDA ~$17.7bn; IBM does not report an operating income line, so EBITDA = pre-tax income from continuing operations ~$10.5bn + interest expense ~$1.9bn + D&A ~$5.3bn from the cash flow statement)
P/FCF	~16.6x (market cap ~$243.7bn / TTM FCF ~$14.7bn; FCF = operating CF $15.8bn − capex $1.2bn, Q4 2025–Q3 2026). On IBM’s own TTM free cash flow of ~$15.3bn the multiple is ~15.9x
Dividend yield	~2.6% ($6.76 annualised / $257.81)
52-week high	$332.46 (02 Jun 2026)
52-week low	$199.19 (23 Jul 2026)
Short interest (% of float)	~2.34% (19.9m shares at the 15 Oct 2026 settlement, Yahoo Finance; MarketBeat showed 2.57% at 30 Sep 2026)
Days to cover	~3.5 days (Yahoo Finance; MarketBeat 4.1 days at 30 Sep 2026)

7. What Are They Building

IBM is investing in quantum computing, enterprise AI and data software, and new mainframe and server hardware.

• Quantum computing: IBM committed more than $10bn over five years on 02 Jun 2026. Its roadmap runs from 120-qubit Nighthawk processors to the Kookaburra fault-tolerant module in 2026, Starling (200 logical qubits) in 2029 and Blue Jay (2,000 logical qubits) in 2033. On 28 Oct 2026 IBM reported linking two Nighthawk processors with 99% average state-transfer fidelity.
• Quantum supply chain: Anderon, an IBM company, finalised a $1bn CHIPS award with the US Department of Commerce on 16 Sep 2026 for a quantum wafer foundry, and IBM completed the HRL Laboratories acquisition on 26 Aug 2026.
• Data and AI software: The $11.6bn Confluent acquisition closed on 17 Mar 2026 and drove 19% growth in Data revenue in Q3. IBM is also building watsonx, the IBM Bob coding agent and AI agent identity tools based on HashiCorp Vault.
• AI partnerships: IBM signed a strategic partnership with OpenAI on 13 Aug 2026, a multi-year GPU inference agreement with Together AI on IBM Cloud on 11 Aug 2026, and expanded its enterprise AI agent work with Nvidia on 27 Oct 2026.
• Systems: Compact z17 and LinuxONE 5 systems launched on 07 Jul 2026, and a next-generation processor with both IBM and Arm architectures for Z and LinuxONE was unveiled on 24 Aug 2026.
• R&D: Research and development spending was $6.86bn in the nine months to 30 Sep 2026, up from $6.13bn a year earlier.

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8. Competitive Landscape

IBM competes with cloud and software platforms, IT services firms and server makers. Market caps are 30 Oct 2026 values from Yahoo Finance quote pages. Metrics come from each company’s FY2025 results.

Peer	Market cap (Oct 2026)	Key 2025 metric
Microsoft (MSFT)	~$3.88tn	FY2025 (Jun year-end) revenue $281.7bn, per Microsoft FY2025 Q4 release
Oracle (ORCL)	~$396.1bn	FY2025 (May year-end) revenue $57.4bn, per Oracle Q4 FY2025 release
Accenture (ACN)	~$158.0bn	FY2025 (Aug year-end) revenue $69.7bn, per Accenture FY2025 release
Hewlett Packard Enterprise (HPE)	~$73.1bn	FY2025 (Oct year-end) revenue $34.3bn, per HPE FY2025 10-K

9. Leadership & Insider Activity

Arvind Krishna is Chairman, President and CEO, and James Kavanaugh is CFO. Frank Baker joined the board on 01 Oct 2026. Form 4 filings in 2026 show three small open-market purchases by directors and one sale by a senior executive. Grants and shares withheld for tax are not listed.

Name	Date	Type	Shares	Price	Value	Plan Type
Robert D. Thomas (SVP Software & Chief Commercial Officer)	26 Aug 2026	Sale	25,000	$230.32	~$5.76m	No 10b5-1 notation in the filing
Michael Miebach (Director)	25 Feb 2026	Purchase	434	$233.33	~$101k	Open market
Michelle Howard (Director)	25 Feb 2026	Purchase	50	$237.83	~$12k	Open market
David Farr (Director)	30 Jan 2026	Purchase	1,000	$304.00	$304,000	Open market

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10. Key Risks

• Debt and goodwill (Financial): Total debt was $63.8bn and goodwill $74.9bn at 30 Sep 2026 after the Confluent and HashiCorp deals. Weak acquisition returns could lead to impairments, and IBM lists its debt level and credit ratings as risks.
• Deal timing and mainframe cycle (Market): Results depend on large deals closing at quarter-end and on the IBM Z product cycle. Both hurt Q2 2026, when IBM Z revenue fell 42%.
• Consulting and AI disruption (Market): Consulting has been flat in 2026, and generative AI could reduce demand for traditional IT services or shift client budgets elsewhere.
• Acquisition integration (Operational): IBM spent $11.4bn on acquisitions in the first nine months of 2026 and must integrate Confluent, HRL and others to deliver the expected growth.
• Currency, trade and regulation (Macro): About 60% of revenue comes from outside the US, exposing IBM to currency moves, tariffs, export controls and AI regulation.
• Cybersecurity and suppliers (Operational): IBM relies on sole-source suppliers for some processor technology, and a security breach would damage a business built on trusted enterprise systems.
• Pension obligations (Financial): Retirement-related obligations were $8.45bn at 30 Sep 2026, and market or interest-rate moves can require extra contributions.

11. Recent Developments

• 28 Oct 2026 — Quantum processors linked. IBM reported linking two 120-qubit Nighthawk processors with 99% average state-transfer fidelity; it also announced a five-year renewal with the USTA.
• 27 Oct 2026 — AI agent tools and Nvidia work. At TechXchange IBM launched identity and controls for AI agents based on HashiCorp Vault and expanded its enterprise AI agent work with Nvidia.
• 21 Oct 2026 — Q3 2026 results. Revenue rose 5% to $17.10bn, software rose 8.2%, operating EPS rose 11% to $2.95 and free cash flow was $3.03bn. IBM raised its 2026 free cash flow growth outlook to more than $1bn and declared a $1.69 dividend.
• 07 Oct 2026 — DARPA selection. IBM was selected for Stage C of DARPA’s Quantum Benchmarking Initiative.
• 16 Sep 2026 — CHIPS award. Anderon, an IBM company, finalised a $1bn CHIPS award for quantum wafer manufacturing.
• 26 Aug 2026 — HRL acquisition completed. IBM closed its purchase of HRL Laboratories, announced on 23 Jul 2026; terms were not disclosed.
• 17 Aug 2026 — Canadian bond issue. IBM closed a C$2.75bn maple bond offering due 2030 and 2034.
• 13 Aug 2026 — OpenAI partnership. IBM and OpenAI announced a strategic partnership.
• 22 Jul 2026 — Q2 2026 results. Revenue rose 1% to $17.16bn and operating EPS was $2.93. Full-year guidance was set at 4–5% constant-currency growth, down from more than 5%.
• 14 Jul 2026 — Q2 shortfall flagged. In a letter to investors, Arvind Krishna said IBM had “faltered” in Q2 as large deals slipped, clients shifted spending to servers and memory, and IBM Z and transaction processing fell short.

Macro data that move technology stocks are tracked on the Economic Calendar.

12. Key Dates

• 10 Nov 2026 — record date for the $1.69 quarterly dividend
• 10 Dec 2026 — payment of the $1.69 quarterly dividend
• Expected late Jan 2027 — Q4 and full-year 2026 results (date not yet announced; FY2025 results were released on 28 Jan 2026)
• Expected 2026 — Kookaburra, the first fault-tolerant quantum module on IBM’s roadmap
• Expected 2029 — Starling fault-tolerant quantum computer in Poughkeepsie, New York

IBM has not yet confirmed its Q4 2026 results date.

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