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IBM · Q2 2026
Archived report (Q2 2026). Latest deep dive →
The quarter in brief
A soft quarter for IBM as Software growth (+5%, led by Red Hat +11%) and Financing gains were offset by an Infrastructure slump (IBM Z −42%) and rising R&D/SG&A pressure, leaving gross margin down 1.0pt and GAAP net income down 1% despite flat revenue growth of +1%.
Net Income
$2,165M
down 1.3% y/y
Revenue
$17,162M
up 1.1% y/y
Operating Income
$2,479M
down 4.5% y/y
Gross Profit
$9,907M
down 0.7% y/y
All figures in $M.
| Line item | Amount and change |
|---|---|
| Software | $7,761 · +5.1% |
| Consulting | $5,327 · +0.2% |
| Infrastructure | $3,835 · −7.4% |
| Financing | $186 · +12.2% |
| Other | $53 · n/m |
| Revenue | $17,162 · +1.1% · Gross margin 57.7% (−1.0pt) |
| Cost of Revenue | $7,255 · +2.5% |
| Gross Profit | $9,907 · −0.7% · 57.7% margin |
| SG&A | $4,981 · −0.9% |
| R&D | $2,311 · +10.2% |
| IP & Custom Dev Income* | $166 · −22.8% |
| Other Income* | $185 · +374% |
| Interest Expense | $486 · −4.7% |
| Operating Income | $2,479 · −4.5% |
| Pre-tax Income | $2,479 · −4.5% · 14.4% margin (−0.9pt) |
| Income Tax | $313 · −22.5% |
| Net Income | $2,165 · −1.3% · EPS diluted $2.27 · 12.6% margin |
Verdict: a soft quarter for IBM as Software growth (+5%, led by Red Hat +11%) and Financing gains were offset by an Infrastructure slump (IBM Z −42%) and rising R&D/SG&A pressure, leaving gross margin down 1.0pt and GAAP net income down 1% despite flat revenue growth of +1%.
OCF $2,597M (+$896M y/y); FCF $2,540M (−$305M y/y); $1,590M dividends paid; FY26 guide: 4-5% constant-currency revenue growth, FCF up ~$1B y/y, pre-tax margin expansion.
Source and notation
* marks non-cash / ≈ estimated. Source: IBM press release / 10-Q (SEC EDGAR).
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Chart: “IBM Q2 2026: where the revenue went” by Who Reports Today, https://whoreportstoday.com/t/ibm/q2-2026. Licensed under CC BY 4.0.
<figure> <a href="https://whoreportstoday.com/t/ibm/q2-2026"><img src="https://whoreportstoday.com/t/ibm/q2-2026/sankey.png" alt="IBM Q2 2026: where the revenue went" loading="lazy" style="max-width:100%;height:auto"></a> <figcaption>Source: <a href="https://whoreportstoday.com/t/ibm/q2-2026">Who Reports Today</a>, licensed under <a href="https://creativecommons.org/licenses/by/4.0/">CC BY 4.0</a></figcaption> </figure>
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- GAAP pre-tax income fell 5% y/y (−0.9pt margin) while Operating (non-GAAP) pre-tax income rose 3%, a gap driven by $716M of acquisition-related and retirement-related add-backs excluded from non-GAAP.
- Infrastructure revenue dropped 7% as IBM Z mainframe sales fell 42% (post cycle-peak comparison), masked partly by Distributed Infrastructure surging 37% on Power/Storage demand and a ~$500M backlog.
- Software was the growth engine (+5%) led by Red Hat/Hybrid Cloud (+11%) and Data (+19%), while legacy Transaction Processing declined 8%.
- Other (income)/expense swung to a $185M net benefit (from $39M in Q2'25), partly non-cash IP/custom development income, cushioning the pre-tax line.
- Effective tax rate dropped to 12.6% from 15.5%, helping GAAP net income decline only 1% despite the 5% pre-tax income drop.
- Adjusted EBITDA rose to $4.8B (27.8% margin, +0.2pt) even as GAAP metrics softened, reflecting continued D&A, stock comp and one-off addbacks.
What distorts the picture in this report and what to watch beyond the headlines.
IBM — International Business Machines provides enterprise solutions in hybrid cloud, artificial intelligence, and software services.
Headquartered in New York, IBM serves clients globally across public and private sectors.
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