IBM raises full-year revenue guidance to 4-5% on Q2 beat, reaffirms $1B FCF growth

The registrant’s press release dated July 22, 2026, regarding its financial results for the period ended June 30, 2026, including consolidated financial statements for the period ended June 30, 2026, is Exhibit 99.1 of this Form 8-K.

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has disclosed in the attached press release certain non-GAAP information which management believes provides useful information to investors. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in the press release, which is Exhibit 99.1 to this Form 8-K. The rationale for management’s use of non-GAAP measures is included in Exhibit 99.2 to this Form 8-K.

GAAP from Continuing Operations $ 17.2B $ 9.9B 57.7 % $ 2.5B 14.4 % $ 2.2B $ 2.27

Year/Year 1 % (1) % (1.0) Pts (5) % (0.9) Pts (1) % (2) %

Operating (Non-GAAP) $ 10.2B 59.4 % $ 3.3B 19.2 % $ 2.8B $ 2.93

Year/Year 0 % (0.7) Pts 3 % 0.3 Pts 5 % 5 %

Software — revenues of $7.8 billion, up 5 percent:

–Hybrid Cloud (Red Hat) up 11 percent

–Automation up 4 percent, up 3 percent at constant currency

–Data up 19 percent, up 18 percent at constant currency

–Transaction Processing down 8 percent, down 9 percent at constant currency

•Consulting — revenues of $5.3 billion, flat, up 1 percent at constant currency:

–Strategy and Technology flat, up 1 percent at constant currency

–Intelligent Operations flat, up 1 percent at constant currency

•Infrastructure — revenues of $3.8 billion, down 7 percent:

–Hybrid Infrastructure down 10 percent

•IBM Z down 42 percent

•Distributed Infrastructure up 37 percent

–Infrastructure Support down 1 percent

Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges and intangible asset amortization, expense resulting from basis differences on equity method investments, retirement-related costs and their related tax impacts.

the company reports adjusted EBITDA and adjusted EBITDA margin which, in addition to the operating (non-GAAP) earnings adjustments described above, also excludes income/(loss) from discontinued operations, income tax expense, net interest expense, depreciation/amortization of non-acquired intangible assets including operating lease right-of-use assets, stock-based compensation, and certain other activity that is not reflective of the company’s ongoing operational results such as workforce rebalancing charges and corporate gains and charges.

The company defines free cash flow as net cash from operating activities less the change in Financing receivables and net capital expenditures, including the investment in software and other asset sales. A key objective of the Financing business is to generate strong returns on equity, and our Financing receivables are the basis for that growth. Accordingly, management considers Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency.

ARR is a key performance metric management uses to assess the health and growth trajectory of our Software segment and is calculated by using the current quarter’s recurring revenue and then multiplying that value by four. This value includes the following consumption models: (1) software subscription agreements, including committed term licenses, (2) as-a-service arrangements such as SaaS and PaaS, and (3) maintenance and support contracts.

Generative AI (GenAI) book of business is a key performance metric management uses to assess the progress and growth of the company's AI strategy and offerings. It is calculated as inception to date Software transactional revenue, plus new SaaS Annual Contract Value and Consulting signings related to specific offerings. Since second-quarter 2023, approximately one-fifth of this book of business comes from Software, and the remaining four-fifths is Consulting.