IBM · International Business Machines Corporation

IBM's second-quarter 2026 results showed modest revenue growth of 1% to $17.2B, driven by Software (up 5% to $7.8B) and Financing (up 12%), but partially offset by a 7% decline in Infrastructure to $3.8B. Within Software, Hybrid Cloud (Red Hat) grew 11%, Data up 19%, while Transaction Processing fell 8%. Consulting was flat. On a GAAP basis, gross margin contracted 1.0 point to 57.7%, and pre-tax income fell 5% to $2.5B, with pre-tax margin down 0.9 points to 14.4%. Net income was essentially flat at $2.2B, with diluted EPS of $2.27 (down 2%). However, operating (non-GAAP) results fared better: gross margin of 59.4%, pre-tax income up 3% to $3.3B, and net income up 5% to $2.8B, yielding EPS of $2.93 (up 5%). Management highlighted strong performance in Red Hat, watsonx, and distributed infrastructure, which has a backlog of nearly $500M. CEO Arvind Krishna noted the company is "in the early innings of a structural shift for business" and is investing in go-to-market and AI commercialization. Guidance was raised: full-year constant currency revenue growth is now expected at 4-5% (from previous), with currency neutral. Free cash flow is still expected to increase by ~$1B. The company also declared a quarterly dividend of $1.69 per share, continuing its long history of consecutive dividends since 1916. Overall, while GAAP results were mixed, the operating performance and upgraded guidance signal confidence in IBM's strategy and portfolio repositioning.