International Business Machines Corporation (IBM)

Business

From the fiscal 2025 Form 10-K and the 2025 Annual Report to Stockholders incorporated into it, accession 0000051143-26-000010.

IBM was incorporated in New York in 1911 as the Computing-Tabulating-Recording Co. and took its present name in 1924. It operates in more than 175 countries and derives about sixty percent of revenue from sales outside the United States. At December 31, 2025 it employed 264.3 thousand people in IBM and wholly owned subsidiaries, plus 8.7 thousand in less-than-wholly-owned subsidiaries and a complementary workforce of 13.8 thousand.

The company describes its strategy as platform-centric and focused on hybrid cloud and artificial intelligence, combining technology with domain expertise. More than 75 percent of the revenue mix now sits in Software and Consulting. IBM reports four segments:

Software ($29,962 million of 2025 revenue, 83.5 percent gross margin, $9,920 million segment profit) covers all software other than the operating-system software reported in Infrastructure, across four areas:

• Hybrid Cloud (Red Hat), enterprise open-source for hybrid and multi-cloud, including Red Hat Enterprise Linux, OpenShift, Ansible and Red Hat AI. 2025 revenue $7,327 million, up 12.9 percent; OpenShift annual recurring revenue ended 2025 at $1.9 billion, up more than 30 percent.
• Automation, application development and integration, infrastructure lifecycle management including HashiCorp, network management, security software, observability, FinOps and asset lifecycle management. 2025 revenue $7,733 million, up 17.9 percent.
• Data, AI assistants and agents, AI tooling and governance, databases, data intelligence, data integration and data security, underpinned by watsonx. 2025 revenue $6,299 million, up 11.9 percent.
• Transaction Processing, mission-critical on-premise software for banking, airlines and retail, including CICS, storage software, analytics and integration running on IBM operating systems. 2025 revenue $8,603 million, up 2.3 percent.

Software annual recurring revenue was $23.6 billion at year-end 2025, about $2 billion higher than a year earlier. ARR is computed by annualizing the current quarter's recurring revenue and covers subscription agreements and committed term licenses, as-a-service arrangements, and maintenance and support contracts.

Consulting ($21,055 million of 2025 revenue, 28.1 percent gross margin, $2,464 million segment profit) spans Strategy and Technology ($11,537 million) and Intelligent Operations ($9,518 million). Delivery leans on the IBM Consulting Advantage AI platform and partnerships with Adobe, AWS, Microsoft, Oracle, Palo Alto Networks, Salesforce and SAP. 2025 signings were $21,757 million, down 13.3 percent against a strong 2024; the trailing-twelve-month book-to-bill ratio was 1.03 and year-end backlog was $31.9 billion, roughly $0.5 billion higher than a year earlier.

Infrastructure ($15,718 million of 2025 revenue, 58.6 percent gross margin, $3,458 million segment profit) comprises Hybrid Infrastructure ($10,618 million, IBM Z plus Distributed Infrastructure covering Power, Storage and IBM Cloud IaaS) and Infrastructure Support ($5,100 million). Mainframes handle an estimated 70 percent of the world's transactional workflows.

Financing ($737 million of 2025 revenue on the segment basis) is a captive financier offering Client Financing (leases, installment plans and loans of generally up to seven years on IBM hardware, software and services) and Commercial Financing (short-term working capital to business partners and distributors, with an existing agreement to sell short-term commercial financing receivables to a third-party investor on a revolving basis).

Geographically, 2025 revenue split $33,342 million Americas, $22,189 million Europe/Middle East/Africa and $12,004 million Asia Pacific.

Research remains central. In 2025 IBM embedded agentic capabilities into its products, evolved the open Granite model family, enhanced Red Hat's AI platform, and describes milestones toward quantum advantage in 2026 and fault tolerance by 2029. Its Spyre AI accelerator powers AI capability in the z17 and Power11 systems. Inorganically, IBM closed ten acquisitions in 2025 including HashiCorp (first quarter) and DataStax, and announced its intent to acquire Confluent, Inc., a transaction that closed on March 17, 2026 and is discussed below.

Risks

From the fiscal 2025 Form 10-K, accession 0000051143-26-000010.

Demand and execution. A downturn in the economic environment or a shift in client buying patterns could reduce revenue and profit. IBM's results are explicitly described as difficult to predict: new products, competitive markets, sales-cycle length and seasonality all bear on them, revenue is historically lower in the first quarter than in the preceding fourth quarter, and the high volume of product typically ordered at the end of each quarter, especially the fourth, makes any given period hard to forecast. Growth areas involve new products, customers and competitors, compounding that difficulty.

Innovation and AI. If IBM cannot sustain cutting-edge innovation in hybrid cloud, AI and quantum, commercialize it at sufficient speed, or attract a developer ecosystem, it could fail to maintain market share and margins. Client adoption rates and viable economic models are less certain in high-value, fast-growing segments. AI carries its own named risk: failure to be recognized as an AI leader with strong governance, AI technologies that do not work as intended or produce unexpected outcomes, an evolving global AI regulatory environment, and the possibility that increased use of AI introduces novel methods of attack.

Acquisitions. IBM expects to keep acquiring, allying and divesting. Named risks are failure to achieve anticipated revenue improvements and cost savings, failure to retain key personnel or strategic relationships, assumption of litigation liabilities, delays in or failure to obtain regulatory approvals, failure to close planned transactions, and the need to secure financing in capital markets that may be disrupted. Goodwill and amortizable intangibles may become impaired if the economic benefit of an acquisition is not realized.

Global footprint. Operating in over 175 countries exposes IBM to local legal, economic and political conditions, technology-specific regulation, currency fluctuation, capital controls and adverse changes in trade relationships. Tariffs, trade sanctions and export controls could affect the movement of goods and services across borders or impose added costs, and mitigation measures taken to date could be made less effective if those regimes change.

Cybersecurity and data protection. IBM's products, services, systems and networks are used in critical customer operations and involve storage and transmission of sensitive and regulated data, including for customers in financial services, healthcare, critical infrastructure and government. Threats are described as increasing in number and sophistication, including through the use of AI. The company states that while it continues to monitor for and remediate a wide range of cybersecurity events, there have not been cybersecurity incidents or vulnerabilities that have had a material adverse effect on it, with no assurance about the future.

Suppliers and quality. Certain businesses rely on a single or limited number of suppliers, including for server processor technology for certain semiconductors. Supplier failure to deliver in sufficient quantity, on time or securely could adversely affect the business.

Talent, government clients and channels. Skilled personnel in IBM's competitive areas are in high demand, and many key employees receive equity as part of total compensation, so stock-market volatility can diminish its value as a retention tool. Government customers may be subject to periodic funding approval, and IBM could be suspended or debarred as a contractor. Third-party distributors, resellers, independent software vendors and ecosystem partners are a material route to market and their financial condition or compliance failures could cause losses.

Pensions, financing and capital markets. Adverse financial-market conditions could reduce pension trust asset values and raise estimated liabilities; an extended downturn could require incremental funding with resulting liquidity risk, and premiums for mandatory pension insolvency insurance outside the U.S. could rise. Inherent in the financing business are concentration of credit, client creditworthiness, interest-rate and currency risk on associated debt, and residual-value determination. Most sales are on open credit, so a change in default rates could require an adjustment to the allowance for credit losses.

Other named risks include reputational damage, intellectual property that may not prevent competitive offerings, reliance on open source licensed with limited or no warranties, ineffective internal controls, accounting estimates that involve judgment, climate and environmental compliance costs, tax matters including the OECD global minimum tax model rules and continuous examination by the IRS and other authorities, legal proceedings, and, for holders of IBM securities, debt-price sensitivity to rates and exchange rates, common-stock volatility, and the effect of rating-agency changes on the value and liquidity of both debt and equity.

Management's discussion, fiscal 2025

From the 2025 Annual Report to Stockholders incorporated into the fiscal 2025 Form 10-K, accession 0000051143-26-000010.

IBM described 2025 as performance above expectations across all key financial metrics. Revenue was $67,535 million, up 7.6 percent as reported and 6.1 percent adjusted for currency. Gross margin of 58.2 percent expanded 1.5 points on portfolio mix and productivity actions. Total expense and other (income) fell 2.6 percent, mainly because the prior year carried pension settlement charges of $3.1 billion, plus productivity savings, offset by organic and inorganic investment in the portfolio, currency, and prior-year gains from the sale of certain QRadar SaaS assets and the divestiture of The Weather Company assets.

Pre-tax income from continuing operations of $10,328 million rose 78.2 percent and pre-tax margin reached 15.3 percent, up 6.1 points. The continuing-operations effective tax rate was negative 2.3 percent versus negative 3.8 percent in 2024; the 2025 benefit came primarily from the resolution of certain tax audit matters, while 2024's reflected the tax impact of the pension settlement charges plus audit resolutions. Income from continuing operations was $10,571 million against $6,015 million, and net income $10,593 million against $6,023 million. Consolidated diluted earnings per share was $11.17 versus $6.43.

On the company's operating (non-GAAP) basis, which removes acquisition-related charges and acquired-intangible amortization, non-operating retirement-related costs, and U.S. tax reform impacts, earnings were $10,993 million, up 13.5 percent, and diluted operating earnings per share $11.59, up 12.2 percent. The 2024 pension settlement charges of $3.1 billion ($2.4 billion net of tax) reduced 2024 consolidated diluted EPS by $2.56; being non-operating and non-cash, they did not affect operating earnings or cash flow.

Segment drivers were: Software revenue up 10.6 percent as reported with double-digit growth in Hybrid Cloud, Automation and Data, segment profit up 14.2 percent to $9,920 million; Consulting revenue up 1.8 percent as reported but only 0.4 percent adjusted for currency, with segment profit up 20.0 percent to $2,464 million and margin up 1.8 points to 11.7 percent on productivity actions; Infrastructure revenue up 12.1 percent on the June 2025 z17 launch, with IBM Z revenue up 51.7 percent as reported and segment profit up 41.2 percent to $3,458 million. Within Distributed Infrastructure, Power revenue performance improved in the second half on the Power11 launch.

Geographically, Americas grew 6.6 percent as reported (the U.S. up 6.9 percent), EMEA 14.2 percent as reported but 9.0 percent adjusted for currency (France, the UK and Italy up 25.1, 20.7 and 18.5 percent as reported), and Asia Pacific declined 0.4 percent.

Financial position. Cash, cash equivalents, restricted cash and marketable securities ended 2025 at $14,470 million, $334 million lower than a year earlier. Total debt of $61,260 million rose $6,287 million, driven by first-quarter 2025 issuances of $8,391 million to build liquidity and plan for future maturities, partially offset by $5,489 million of maturities; Financing segment debt was $15,093 million and non-Financing debt $46,167 million, with the Financing debt-to-equity ratio at 9.0 to 1. Working capital turned negative at $(1,714) million from $1,340 million, a current ratio of 0.96:1 versus 1.04:1, as current liabilities rose $5,516 million on deferred income, reclassification of long-term debt to short-term, and accounts payable. Total equity of $32,740 million rose $5,348 million on net income of $10,593 million and a $1,937 million increase in common stock, less $6,255 million of dividends. Senior long-term debt was rated A- / A3 / A- by Standard & Poor's, Moody's and Fitch, unchanged from the prior year-end.

Cash flow. Net cash from operating activities was $13,193 million against $13,445 million in 2024; cash used in financing receivables rose $2,728 million on business growth including the z17 cycle, offset by performance-related improvement in net income. IBM's free cash flow, which it defines as net cash from operating activities less the change in Financing receivables and less net capital expenditures including the investment in software and other asset sales, not as operating cash flow less capital expenditure, was $14.7 billion, up $2.0 billion. IBM invested $8,294 million in acquisitions, principally HashiCorp, and returned $6,255 million in dividends. The quarterly common stock dividend was raised from $1.67 to $1.68 per share in the second quarter of 2025. Committed global credit facilities stood at $10.0 billion, unchanged across 2023-2025.

Pensions. The overall net underfunded position at December 31, 2025 was $2,283 million, $374 million better than a year earlier on higher discount rates. Worldwide qualified plans were 116 percent funded and the U.S. Personal Pension Plan 137 percent funded, with a U.S. asset return of 8.8 percent. Contributions across all retirement-related plans were expected to be about $1.4 billion in 2026, and 2026 pre-tax retirement-related plan cost about $1.5 billion, of which the non-operating component was expected to rise roughly $0.4 billion to about $0.5 billion.

Looking forward. Management framed hybrid cloud and AI as the two most consequential enterprise technologies, positioned watsonx and watsonx Orchestrate as the software route to production AI, and pointed to the Client Zero approach of embedding AI in IBM's own workflows. From the second quarter of 2025 IBM shifted Distributed Infrastructure manufacturing to an industry-standard strategic partner. It said it entered 2026 with momentum, while noting the operating environment remains dynamic.

The current quarter, Q2 fiscal 2026

From the Form 10-Q for the quarter ended June 30, 2026, accession 0000051143-26-000078.

The quarter was, in management's own words, below expectations. Revenue of $17,162 million grew 1.1 percent both as reported and adjusted for currency. Gross margin fell 1.0 point to 57.7 percent and gross profit declined 0.7 percent to $9,907 million. Total expense and other (income) rose 0.7 percent to $7,428 million. Pre-tax income from continuing operations fell 4.5 percent to $2,479 million and pre-tax margin dropped 0.9 points to 14.4 percent. Net income was $2,165 million versus $2,194 million, and diluted EPS $2.27 versus $2.31. On the operating (non-GAAP) basis the direction reverses: operating earnings of $2,792 million rose 5.3 percent and operating diluted EPS of $2.93 rose 4.6 percent, the gap driven by acquisition-related charges of $548 million after tax (up from $443 million) and non-operating retirement-related costs of $76 million (up from $17 million).

What went wrong, and why the six months look better. The shortfall was concentrated in IBM Z and its associated software stack. Infrastructure revenue fell 7.4 percent to $3,835 million; within it, IBM Z revenue fell 42.0 percent against a historically strong prior-year z17 launch quarter, and Hybrid Infrastructure fell 10.3 percent. Infrastructure gross margin fell 3.1 points to 58.4 percent and segment profit fell 13.4 percent to $835 million. In Software, Transaction Processing, the revenue category tied to IBM Z incumbency and its enterprise license agreements, fell 8.1 percent to $2,030 million, holding total Software growth to 5.1 percent despite Data up 18.9 percent and Hybrid Cloud up 11.2 percent. Management attributed the miss to the final weeks of June, when a shift in client spending priorities left numerous large deals unclosed within expected timelines; it said many clients redirected spending toward servers, storage and memory to secure supply-constrained infrastructure ahead of expected price increases. That same dynamic shows in Distributed Infrastructure revenue rising 37.3 percent, IBM's strongest quarter on record for that line, with double-digit growth in both Storage and Power.

The six-month figures carry the strong first quarter and so read differently: revenue of $33,079 million up 5.0 percent as reported (3.4 percent adjusted for currency), net income of $3,381 million up 4.1 percent, diluted EPS of $3.55 up 3.5 percent, and operating diluted EPS of $4.84 up 10.0 percent. Six-month Infrastructure revenue was still up 1.9 percent and Infrastructure segment profit up 12.1 percent to $1,360 million, the opposite sign to the quarter. The gap between the two periods is the second quarter itself.

The segments that held up. Software revenue of $7,761 million grew 5.1 percent with segment profit up 8.9 percent to $2,502 million and segment margin up 1.1 points to 32.2 percent; roughly 80 percent of Software revenue is recurring and grew healthily, with the remaining transactional 20 percent, predominantly IBM Z-linked enterprise license agreements, bearing the decline. Software annual recurring revenue reached $24.6 billion, up about $2 billion, reflecting Confluent plus growth elsewhere in the recurring base; OpenShift ARR is now over $2 billion. Consulting revenue of $5,327 million was essentially flat as reported and up 1.1 percent adjusted for currency, but gross margin rose 1.4 points to 28.9 percent and segment profit rose 15.1 percent to $647 million. Consulting signings grew 5.0 percent as reported in the quarter and 6.8 percent over six months, a second consecutive quarter of growth, with a trailing-twelve-month book-to-bill of approximately 1.05 and backlog of $30.8 billion at June 30, 2026, below the $31.9 billion at year-end 2025. Financing revenue of $186 million rose 12.2 percent but Financing segment profit fell 39.7 percent to $108 million.

Geographically the quarter was flat everywhere: Americas revenue fell 0.5 percent to $8,417 million, EMEA rose 4.1 percent to $5,633 million, and Asia Pacific rose 0.3 percent as reported but 5.2 percent adjusted for currency.

Balance sheet and cash. Total assets of $152,099 million were up $0.2 billion from year-end 2025 while total liabilities fell $1.6 billion to $117,558 million and equity rose $1.8 billion to $34,541 million. Cash, cash equivalents, restricted cash and marketable securities fell $6.3 billion to $8.2 billion, chiefly because IBM paid for Confluent; debt rose $0.7 billion to $62.0 billion, with $7.4 billion issued in the first quarter of 2026 for general corporate purposes. Credit ratings were unchanged at A- / A3 / A- on senior long-term debt. Global credit facilities remain $10.0 billion, undrawn, and on June 22, 2026 IBM amended its $2.5 billion three-year and $7.5 billion five-year credit agreements to extend the maturity dates.

Over six months, net cash from operating activities was $7,766 million, up $1,695 million, on higher cash provided by receivables (mainly financing receivables) and performance-related improvement in net income, partly offset by higher inventory, cash taxes and net interest expense. Free cash flow on IBM's own definition was $4,760 million against $4,808 million, essentially flat, after $743 million of net capital expenditure. Investing used $10,970 million, including the Confluent purchase; financing was a net use of $3,008 million against a net source of $2,589 million a year earlier, on higher maturities and lower issuance. Dividends paid over six months were $3,166 million. Management noted it deliberately built inventory through the first half given the constrained infrastructure supply environment, to support anticipated second-half demand.

No shares were repurchased in the quarter. IBM suspended its buyback at the time of the Red Hat closing in 2019; about $2.0 billion remains under the October 2018 authorization.

Management's forward commentary. IBM reiterated conviction in the portfolio while acknowledging the quarter fell short, citing enhancements to the go-to-market model, the high-growth portfolio, and productivity actions spanning both spend reduction and growth. It highlighted IBM Bob, an AI-based software development system that became generally available in March; Lightwell, an enterprise clearinghouse for open-source software vulnerabilities launched in the quarter and generally available in July; a smaller LinuxONE system introduced in July; and, in quantum, a letter of intent with the U.S. Department of Commerce to build Anderon, a pure-play quantum wafer foundry supported by $1 billion in CHIPS Act incentives from the Department and a $1 billion cash contribution by IBM, alongside disclosed plans to invest more than $10 billion in quantum over the next five years across R&D, capital expenditure, manufacturing scaling, M&A and ecosystem expansion.

Completed in the period, Confluent. On March 17, 2026 IBM completed its acquisition of all outstanding shares of Confluent, Inc. Confluent shareholders of record received $31 per share in cash, a total equity value of approximately $11.3 billion. Total purchase price was $11,602 million, comprising $11,268 million cash for outstanding common stock, $269 million cash for equity awards and $65 million of stock-based compensation attributable to pre-acquisition services. The allocation as of June 30, 2026 recorded $7,238 million of goodwill (of which $7,149 million to Software and $89 million to Consulting), $2,122 million of client relationships amortized over 12 years, $1,590 million of completed technology over 7 years and $122 million of trademarks over 5 years, a weighted-average useful life of 9.7 years for the amortizable intangibles, against $2,045 million of liabilities assumed. IBM acquired $1,165 million of cash and $917 million of short-term marketable securities with the business, the latter sold by March 31, 2026, and assumed $1,100 million of Confluent convertible notes recognized at fair value, settled on April 15, 2026. About 1 percent of the goodwill is expected to be tax deductible. IBM issued and assumed 3.0 million stock awards with a fair value of $665 million. The valuation remains subject to revision for up to one year from the acquisition date, and any revision may be material. Confluent was integrated into the Software segment and is credited in the quarter with driving Data revenue growth.

Subsequent events

From the Form 10-Q for the quarter ended June 30, 2026, accession 0000051143-26-000078, and the Form 8-K dated August 10, 2026, accession 0001104659-26-097089.

Dividend. On July 22, 2026 IBM announced that the Board of Directors approved a quarterly dividend of $1.69 per common share, payable September 10, 2026 to stockholders of record on August 10, 2026. That is an increase from the $1.68 per share declared on January 28, 2026 and paid March 10, 2026.

Acquisition agreement signed, target not named. On July 22, 2026, after the June 30 period end, IBM entered into a definitive agreement to acquire a business, expected to close in the second half of 2026 subject to regulatory approval and other customary closing conditions. Upon closing the acquired business will be integrated into the Infrastructure segment. The filing does not name the target and does not disclose a purchase price.

Canadian dollar notes offering. On August 10, 2026 IBM entered into an underwriting agreement with CIBC World Markets Inc., RBC Dominion Securities Inc., Scotia Capital Inc. and TD Securities Inc. as representatives of the underwriters, covering C$2,750,000,000 aggregate principal amount of debt securities: C$1,750,000,000 of 4.100% Notes due 2030 and C$1,000,000,000 of 4.750% Notes due 2034. The notes are issued under IBM's indenture dated October 1, 1993 with The Bank of New York Mellon as trustee, were offered by means of a prospectus supplement, and the offering in Canada is made in the provinces of Canada on a private placement basis under exemptions from Canadian prospectus requirements. The securities were to be delivered in book-entry form through CDS Clearing and Depository Services Inc.

For reference, the comparable events disclosed as subsequent to fiscal 2025 in the annual report, accession 0000051143-26-000010, were the January 28, 2026 declaration of the $1.68 per share quarterly dividend and, on February 3, 2026, the issuance of $3.25 billion of U.S. dollar fixed-rate notes in tranches maturing in 3 to 30 years with coupons of 4.0 to 5.8 percent, $3.3 billion of Euro fixed-rate notes maturing in 5 to 12 years with coupons of 3.0 to 3.85 percent, and $0.9 billion of Euro floating-rate notes maturing in 2 years.

Filings that contain financial statements

• 8-K, accession 0000051143-26-000077, filed July 22, 2026, Exhibit 99.1 furnishes IBM's second-quarter 2026 earnings release, covering the quarter and six months ended June 30, 2026. It includes the comparative income statement, condensed consolidated balance sheet (June 30, 2026 vs. December 31, 2025), and statement of cash flows, plus non-GAAP reconciliations in Exhibit 99.2. This is the most current fiscal-period source and matches the numbers underlying the July 23, 2026 Form 10-Q.
• 8-K, accession 0000051143-26-000004, filed January 28, 2026, Exhibit 99.1 furnishes fourth-quarter and full-year 2025 results (revenue, margins, cash flow, and EPS for both periods), with non-GAAP reconciliations in Exhibit 99.2.
• 8-K, accession 0000051143-26-000036, filed April 22, 2026, Exhibit 99.1 furnishes first-quarter 2026 results and consolidated financial data, with Exhibit 99.2 non-GAAP reconciliations.
• 8-K, accession 0000051143-25-000061, filed October 22, 2025, Exhibit 99.1 furnishes third-quarter 2025 results and consolidated financial data, with Exhibit 99.2 non-GAAP reconciliations.
• 8-K, accession 0000051143-25-000048, filed July 23, 2025, Exhibit 99.1 furnishes second-quarter 2025 results and consolidated financial data (prior-year comparative basis), with Exhibit 99.2 non-GAAP reconciliations.
• Form 10-Q, accession 0000051143-26-000078, filed July 23, 2026, for the period ended June 30, 2026, carries the full interim financial statements (balance sheet, income statement, comprehensive income, cash flows) and the notes, including the acquisitions note discussed below.

Second-quarter 2026 results and updated full-year outlook

On July 22, 2026, IBM reported second-quarter 2026 revenue of $17.2 billion, up 1 percent year over year, with GAAP diluted earnings per share of $2.27 (down 2 percent) and operating (non-GAAP) diluted EPS of $2.93 (up 5 percent). Software revenue grew 5 percent, led by Red Hat (up 11 percent), while Infrastructure revenue fell 7 percent as IBM Z declined 42 percent, partly offset by Distributed Infrastructure growth of 37 percent. Net cash from operating activities was $2.6 billion for the quarter ($7.8 billion year to date), and free cash flow, a non-GAAP measure IBM defines as net cash from operating activities less the change in IBM Financing receivables and less net capital expenditures, not as operating cash flow less capital expenditure, was $2.5 billion for the quarter ($4.8 billion year to date, flat year over year). IBM ended the quarter with $8.2 billion of cash, restricted cash and marketable securities and total debt of $62.0 billion. The company said it had invested $10.5 billion in acquisitions during the year to date. Management narrowed its full-year 2026 outlook to constant-currency revenue growth of four to five percent (down from "more than 5 percent" previously) while reaffirming an increase of about $1 billion in year-over-year free cash flow (accession 0000051143-26-000077, Exhibit 99.1).

Ahead of the July 22 earnings release, IBM issued a July 14, 2026 letter to investors (accession 0000051143-26-000070) previewing preliminary second-quarter results and explaining a shortfall in Infrastructure and the associated software stack, chiefly Transaction Processing, that management attributed to clients shifting capital spending toward securing supply-constrained servers, storage and memory ahead of anticipated price increases, compounded by industry-wide cybersecurity distractions that delayed the closing of several large deals.

Prior 2026 and 2025 quarterly results

• First-quarter 2026 (reported April 22, 2026, accession 0000051143-26-000036): revenue of $15.9 billion, up 9 percent; GAAP diluted EPS of $1.28 (up 14 percent); operating (non-GAAP) diluted EPS of $1.91 (up 19 percent); free cash flow of $2.2 billion. Management reiterated full-year constant-currency revenue growth of "more than 5 percent" and noted the Confluent acquisition and $1.6 billion of dividends paid in the quarter.
• Fourth-quarter and full-year 2025 (reported January 28, 2026, accession 0000051143-26-000004): fourth-quarter revenue of $19.7 billion, up 12 percent; full-year 2025 revenue of $67.5 billion, up 8 percent; full-year net cash from operating activities of $13.2 billion and free cash flow of $14.7 billion. Full-year 2025 GAAP diluted EPS from continuing operations was $11.14 ($11.17 consolidated), GAAP results benefiting from a tax item tied to the resolution of certain tax audit matters. Management guided to 2026 constant-currency revenue growth of "more than 5 percent" and free cash flow growth of about $1 billion.
• Third-quarter 2025 (reported October 22, 2025, accession 0000051143-25-000061): revenue of $16.3 billion, up 9 percent; management raised its full-year 2025 outlook for revenue growth and free cash flow, citing an AI-related book of business exceeding $9.5 billion.
• Second-quarter 2025 (reported July 23, 2025, accession 0000051143-25-000048): revenue of $17.0 billion, up 8 percent; management raised its full-year 2025 free-cash-flow outlook to more than $13.5 billion.

Mergers and acquisitions

IBM completed its acquisition of Confluent, Inc. on March 17, 2026. Confluent shareholders received $31 per share in cash, for total consideration of approximately $11.6 billion. The transaction added $7.24 billion of goodwill (assigned $7.15 billion to the Software segment and $89 million to Consulting) plus identified intangible assets for client relationships, completed technology and trademarks; the business was integrated into the Software segment (Form 10-Q, accession 0000051143-26-000078, Note 5, "Acquisitions & Divestitures").

Separately, on July 22, 2026, IBM entered into a definitive agreement to acquire an unnamed business that is expected to close in the second half of 2026, subject to regulatory approval and other customary closing conditions. Upon closing, the acquired business will be integrated into the Infrastructure segment. Neither the counterparty's name nor the purchase price was disclosed in the filing (Form 10-Q, accession 0000051143-26-000078, Note 5).

Debt issuance

• On August 10, 2026, IBM priced C$2,750,000,000 of Canadian-dollar notes, consisting of C$1,750,000,000 of 4.100% Notes due 2030 and C$1,000,000,000 of 4.750% Notes due 2034, underwritten by CIBC World Markets, RBC Dominion Securities, Scotia Capital and TD Securities. The notes were offered under IBM's effective shelf registration statement (8-K, accession 0001104659-26-097089, filed August 14, 2026).
• On January 29, 2026, IBM priced a two-currency debt offering totaling €3,500,000,000 of euro-denominated notes (€1,000,000,000 3.000% Notes due 2031; €1,000,000,000 3.450% Notes due 2034; €750,000,000 3.850% Notes due 2038; €750,000,000 Floating Rate Notes due 2028) and $3,250,000,000 of U.S. dollar notes ($500,000,000 4.000% Notes due 2029; $500,000,000 4.300% Notes due 2031; $500,000,000 4.600% Notes due 2033; $1,000,000,000 4.950% Notes due 2036; $750,000,000 5.800% Notes due 2056) (8-K, accession 0001104659-26-009343, filed February 2, 2026).

Credit facilities

On June 22, 2026, IBM extended by one year the maturity of its existing $2.5 billion three-year revolving credit agreement (now maturing June 20, 2029) and its existing $7.5 billion five-year revolving credit agreement (now maturing June 22, 2031). Both agreements are with a bank syndicate led by JPMorgan Chase Bank, N.A. as administrative agent; other terms were unchanged (8-K, accession 0000051143-26-000061, filed June 23, 2026).

Dividend

IBM's board declared a regular quarterly cash dividend of $1.69 per common share, payable September 10, 2026, to stockholders of record August 10, 2026, continuing a streak of consecutive quarterly dividends paid every year since 1916 (8-K, accession 0000051143-26-000077, Exhibit 99.1).

Quantum computing investment

On May 28, 2026, IBM disclosed at an investor meeting plans to invest more than $10 billion over the next five years in quantum computing (R&D, capital expenditures, ecosystem partnerships, manufacturing scaling and M&A), aimed at delivering the first large-scale fault-tolerant quantum computer by 2029. The company said it has deployed more than 90 quantum systems and cited a client and partner ecosystem of more than 325 Fortune 500 companies, startups, universities and government agencies. The announcement followed a letter of intent between IBM and the U.S. Department of Commerce, disclosed the prior week, to build an American quantum chip foundry ("Anderon") (8-K, accession 0000051143-26-000047, filed May 28, 2026).

Governance and annual meeting

• IBM held its 2026 Annual Meeting of Stockholders on April 28, 2026. Stockholders elected all 13 director nominees, ratified the auditor, approved (on an advisory basis) executive compensation, and approved the 2026 Long-Term Performance Plan. Several stockholder proposals, on outside-director stock ownership guidelines, a right to act by written consent, a report on AI bias, and a report on discrimination in charitable support, were voted down. Because director Frederick H. Waddell was not a nominee for re-election, the board decreased the authorized number of directors to thirteen effective April 28, 2026 (8-K, accession 0000051143-26-000043, filed May 1, 2026).
• On January 30, 2026, IBM announced the election of Ramon Laguarta, Chairman and CEO of PepsiCo, Inc., to its board of directors, effective March 1, 2026; the board's authorized size was increased to fourteen directors effective that date (8-Ks, accessions 0000051143-26-000006 and 0000051143-26-000015).

Not reflected as a distinct SEC event

The July 14, 2026 investor letter (Exhibit 99.1, accession 0000051143-26-000070) describes the July 8, 2026 general availability of "Lightwell," an open-source security offering it characterizes as a $5 billion commitment; IBM did not report the Lightwell general availability as a separate 8-K item.

About this file

IBM annual income statement, balance sheet and cash flow

Taken from the SEC filings and normalized to actual dollars.

IBM quarterly income statement, balance sheet and cash flow

Taken from the SEC filings and normalized to actual dollars.

IBM year-to-date income statement and cash flow

Taken from the SEC filings and normalized to actual dollars.

IBM trailing twelve month income statement and cash flow

Derived by AI from the figures the filings report. No filing prints these, so none of them is linked.

• Derivation. FY2025 as reported in the FY2025 10-K (accession 0000051143-26-000010), plus the six months ended June 30, 2026, less the six months ended June 30, 2025, both as reported in the Q2 2026 10-Q (accession 0000051143-26-000078). Not a figure the company publishes.

Adjustments

Prior year to date

Taken from the SEC filings and normalized to actual dollars.

Notes

• Annual figures come from the FY2025 10-K, accession 0000051143-26-000010. That 10-K's Items 7, 7A and 8 are incorporated by reference from IBM's 2025 Annual Report to Stockholders, filed as Exhibit 13 to the same accession; the audited consolidated statements and notes used here are in that exhibit and are cited to the 10-K's accession.
• Quarterly income statement, balance sheet and segment figures come from the 10-Q for the quarter ended June 30, 2026, accession 0000051143-26-000078.
• Cash flow provenance: the 10-Q presents its consolidated statement of cash flows for the six months only. Every three-month cash flow figure in the quarterly entries is taken from the statement of cash flows in Exhibit 99.1 to the 8-K furnished on July 22, 2026, accession 0000051143-26-000077, and each quarterly entry carries that accession in cash_flow_source_accession. The six-month cash flow figures come from the 10-Q itself. That exhibit footnotes its 2025 cash flow columns as "Reclassified to align with the Consolidated Statement of Cash Flows presentation."
• Balance sheet coverage follows what the filings print. The 10-K presents balance sheets at December 31, 2025 and December 31, 2024 only, so FY2023 carries income statement, cash flow and segment figures and no balance sheet. The 10-Q presents balance sheets at June 30, 2026 and December 31, 2025, so the Q2 FY2025 entry carries no balance sheet: no June 30, 2025 balance sheet appears in either filing.
• total_debt is the sum of the short-term debt and long-term debt lines as printed on the balance sheet; the company does not print a combined total.
• Sign convention follows the filings. Within "Total expense and other (income)", intellectual property and custom development income and other (income) and expense are printed in parentheses when they reduce expense and are recorded here as negative amounts. "Provision for/(benefit from) income taxes" is likewise negative in FY2025 and FY2024, where IBM recorded a net tax benefit rather than a charge.
• Segment figures are IBM's management system segment view for its four reportable segments (Software, Consulting, Infrastructure, Financing). Segment revenue for Financing differs slightly from the Financing revenue line on the income statement in 2024 and 2023 ($713 million and $741 million in the segment view against $709 million and $737 million on the income statement) because the segment view reflects intercompany financing activity that is eliminated in the consolidated results. Each segments block also carries the filing's own reconciliations: reportable-segment revenue plus other revenue to total revenue, and total reportable segment profit to pre-tax income from continuing operations.
• Segment profit is the company's own performance measure, not a GAAP subtotal, and it is not struck against the consolidated income statement lines. IBM does not present an operating income line, so none is reported here.
• Free cash flow is a non-GAAP measure as IBM defines it, net cash from operating activities less the change in Financing receivables and net capital expenditures, including investment in software and other asset sales, and is therefore NOT net cash from operating activities less capital expenditures. It is kept in a separate non_gaap block, alongside net cash from operating activities excluding IBM Financing receivables, so it can never be read as a GAAP line. The GAAP cash flow block carries operating cash flow and the capital spending lines exactly as the statements print them.
• Precision of the annual non-GAAP free cash flow differs by year, because the filing's precision does. FY2025 is stated as $14,734 million in the annual report's Management Discussion. FY2024 and FY2023 appear only in the company's cash-flow view table, which is stated in billions, so they are carried at that table's precision of $12.7 billion and $11.2 billion. The quarterly and six-month free cash flow figures are printed in millions in the July 22, 2026 earnings release exhibit.
• Dividends per share are the amounts printed in the consolidated statement of equity, which states each period's dividend as "Cash dividends paid, common stock ($X per share)".
• The trailing twelve months block is derived, not published by the company: FY2025 as reported in the 10-K, plus the six months ended June 30, 2026, less the six months ended June 30, 2025, both as reported in the 10-Q. It carries income statement and cash flow lines only; balance sheet items are point-in-time and are on the June 30, 2026 quarter instead.
• year_to_date and prior_year_to_date are the six-month columns the 10-Q prints beside the quarter. They are not quarters and are kept out of the quarterly list.

Uncertainties

• FY2024 and FY2023 company-defined free cash flow are carried at the $0.1 billion precision of the table that prints them; a figure stated to the nearest million is not published for those two years in this 10-K.
• No balance sheet as of June 30, 2025 is printed in either filing, so the Q2 FY2025 entry has none. Its year-over-year balance sheet comparison is not available from these filings.
• The three-month 2025 cash flow column used for Q2 FY2025 comes from the comparative column of the July 22, 2026 earnings release exhibit, which footnotes those 2025 amounts as reclassified to align with the consolidated statement of cash flows presentation. They are not the figures as originally furnished in July 2025.
• IBM's "Other revenue" and "Other, divested businesses" reconciling items are carried inside the segments block as printed. They are reconciling amounts, not a fifth reportable segment, and the Other revenue line was negative in the second quarter of 2025.
• Trailing twelve months figures are arithmetic combinations of two filings' columns rather than a period any filing presents, and small differences from a directly computed figure can arise from the rounding each filing applies.
• Segment revenue and segment profit are measured on the company's internal management system basis and its composition can change between years; the Financing segment's 2024 and 2023 revenue differs from the income statement's Financing revenue line for that reason.

Company details

Fiscal period

Source filings