IBM CEO Arvind Krishna attends Diwali celebrations in the Oval Office of the White House in Washington on October 21, 2025.
Allison Robert | Bloomberg | getty images
IBM Shares fell 6% in extended trading Wednesday after the hardware, software and consulting provider reported stronger-than-expected first-quarter results but kept its full-year guidance intact.
Here’s how the company performed compared to the LSEG consensus:
- earnings per share: $1.91 adjusted vs. $1.81 expected
- Income: $15.92 billion vs. $15.62 billion expected
IBM’s revenue in the quarter increased 9% year over year, according to a statement. Net income in the fourth quarter of 2024 rose to $1.22 billion, or $1.28 per share, from $1.06 billion, or $1.12 per share. Adjusted earnings do not include acquisition-related adjustments.
Management reiterated its outlook for 2026, which includes more than 5% revenue growth at constant currency and $1 billion of free cash flow growth.
“I don’t think we’ve ever raised guidance in the first quarter,” IBM finance chief Jim Kavanaugh told analysts on a conference call. He said executives believe the company should be “a prudent operator.”
Iran’s war against America and Iran began on February 28. CEO Arvind Krishna said on the call that IBM saw the strongest revenue growth in decades in the Middle East during the quarter.
“We were not impacted by developments in the Middle East in the first quarter,” Krishna said. “Uncertainties remain, but our diversity across businesses, geographies, industries and large enterprise customers positions us well.”
IBM’s first-quarter software revenue rose 11% to $7.05 billion, exceeding the consensus of $7.02 billion among analysts surveyed by StreetAccount.
Jim Kavanaugh, IBM’s finance chief, said revenue growth from Red Hat Enterprise Linux, generated by IBM’s $34 billion acquisition of Red Hat in 2019, slowed from the fourth quarter.
Kavanaugh said, “I think it’s a function of, you know, the federal lack of signatures in the fourth quarter and the government shutdown, but it’s also a very disorganized hardware supply chain.”
Consulting revenue, $5.27 billion, was up 4%, just short of the StreetAccount consensus of $5.28 billion.
Infrastructure rose 15% to $3.33 billion, above the $3.16 billion StreetAccount consensus. IBM pointed to a 51% increase in Z mainframe hardware revenue, with the z17 mainframe models continuing to outperform previous cycles, the company said.
As of Wednesday’s close, IBM shares had fallen about 15% so far in 2026, while the S&P 500 index was up 4% over the same period.
The stock dropped 13% in a single day in February, when artificial intelligence model builder Anthropic said AI could help companies modernize code written in the COBOL programming language. Applications written in COBOL could run on IBM mainframe computers. “AI strengthens, not weakens, the mainframe case,” Rob Thomas, IBM’s senior vice president of software, wrote in an article. linkedin post.
In mid-March, IBM completed the $11 billion acquisition of data streaming software company Confluent. Kavanaugh said IBM is now seeing about 1% growth in its operating pre-tax margin despite closing the Confluent deal nearly two months earlier than expected.
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