INTERNATIONAL BUSINESS MACHINES CORP Earnings Summary — Q1 2026

• Revenue growth of 9.46% YoY outpaced recent historical averages, driven by the pivot to Hybrid Cloud and watsonx AI.
• Net income rose 15.3% YoY to $1.22 billion, showing improved operating leverage despite seasonal sequential declines.
• Research and Development spending increased 11.4% YoY to $2.17 billion, reflecting heavy investment in generative AI capabilities.
• The cost of revenue and total operating expenses remained well-controlled despite significant top-line expansion.
• IBM's transition away from legacy infrastructure through the Kyndryl spin-off appears to be yielding a higher-margin software mix.
• Interest expenses rose slightly to $473 million, reflecting the higher rate environment on the company's debt stack.

Management is focused on expanding the watsonx platform and scaling hybrid cloud adoption across enterprise clients. The structural transformation into a software-centric business is expected to drive long-term margin expansion.

Improving

The consistent YoY revenue growth marks a departure from the multi-year secular declines seen during the pre-2021 transformation period.

IBM enters the remainder of 2026 with strong momentum in its software segment, particularly in Data & AI. The company is positioned to capture enterprise-grade AI spend as clients move from pilots to production.