IBM disclosed third-quarter financial results that surpassed consensus forecasts on both revenue and earnings metrics. Net income reached $2.19 billion, or $2.30 per share, compared with $1.74 billion, or $1.84 per share, in the prior-year period. Revenue expanded approximately 5% on an annual basis.
The software division generated $7.80 billion in quarterly revenue, representing 8% growth and exceeding the $7.66 billion analyst consensus. Infrastructure revenue totaled $3.70 billion, up 4% and above the $3.57 billion consensus estimate. Consulting revenue came to $5.34 billion, remaining flat compared with the prior year and slightly trailing the $5.37 billion consensus. The consulting segment’s gross margin contracted to 27.4% from 28.9% in the preceding quarter, as the company reinvested productivity improvements into digital transformation initiatives.
IBM’s adjusted gross margin stood at 58.5%, narrower than the 59.1% consensus projection. Finance Chief Jim Kavanaugh indicated that artificial intelligence represented approximately 30% of consulting revenue during the quarter and 35% of the backlog. CEO Arvind Krishna stated that clients are deploying advanced artificial intelligence capabilities to transform broader business operations rather than addressing isolated use cases.
The company maintained its full-year constant-currency revenue growth guidance at 4% to 5%. IBM raised its full-year free cash flow forecast to reflect an increase exceeding $1 billion, compared with a prior projection of approximately $1 billion. Street-level revenue expectations for the full year were estimated at $32 billion, which the finance chief indicated the company views as a comfortable target.
During the quarter, IBM announced an agreement to acquire HRL Laboratories, a research operation previously owned by Boeing and General Motors. IBM shares declined in extended trading following the earnings announcement, while the broader market index registered gains during the period.
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