Investing.com — International Business Machines (NYSE:IBM) is down more than 7% in early U.S. trading Thursday after the tech giant reported fourth-quarter results that beat analyst expectations, driven by strong software performance and robust mainframe adoption.
IBM posted adjusted earnings per share of $4.52, beating analyst expectations of $4.29 by $0.23. Revenue rose 12% year over year (9% at constant exchange rates) to $19.7 billion, surpassing the consensus estimate of $19.22 billion. The company’s generative AI business has now reached more than $12.5 billion.
“We delivered strong revenue growth in the fourth quarter, with double-digit software performance. Additionally, Infrastructure continued its double-digit revenue growth driven by robust adoption of the next generation of our mainframe platform,” said Arvind Krishna, chairman, president and CEO of IBM.
“We enter 2026 with momentum and in a strong position, which gives us confidence in our expectations for the full year,” Krishna added.
Software revenues increased 14% (11% at constant exchange rates), while infrastructure revenues increased 21% (17% at constant exchange rates), highlighted by a 67% increase in IBM Z mainframe revenues. Consulting revenue grew more modestly by 3% (1% at constant exchange rates).
For the full year 2025, IBM reported revenue of $67.5 billion, up 8% year over year (6% at constant exchange rates). The company generated $14.7 billion in free cash flow (FCF), an increase of $2.0 billion from the previous year.
Looking ahead to 2026, IBM expects steady foreign exchange revenue growth of more than 5% and an increase of approximately $1 billion in free cash flow year-over-year. The currency is expected to provide about half a point of tailwind to growth this year.
“Given strong FCF execution in CY25, we would view the current CY26 guidance as quite conservative and see multiple levers for upside,” Evercore analyst Amit Daryanani said in a note.
In addition, BMO Capital Markets analyst Keith Bachman said IBM delivered a “reasonable quarter and (and) solid outlook.”
“We believe IBM has an attractive strategy and positioning, although we do not find the valuation attractive,” he added, reiterating the stock’s Market Perform rating while raising the share price to $350 from $305.
The Company declared a quarterly cash dividend of $1.68 per common share, payable on March 10, 2026, to stockholders of record on February 10, 2026.
(Luke Juricic contributed to this report.)
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