IBM reported first-quarter revenue of $15.9 billion on 22 April, up 9% year-on-year and ahead of Wall Street’s $15.6 billion estimate. Adjusted earnings per share came in at $1.91, beating the $1.81 consensus.
Why it matters: IBM’s results show AI spending is filtering through enterprise budgets across software, consulting, and hardware, not just in the hyperscaler cloud segment that has dominated the narrative.
Software led the way
The software division generated $7.1 billion, up 11%, with AI-specific software revenue exceeding $1.5 billion and growing over 40% annually. Infrastructure revenue jumped 15% to $3.3 billion, driven by a 51% surge in z17 mainframe hardware sales.
Consulting showed mixed signals
Consulting revenue rose 4% to $5.27 billion, with signings up 6%. Generative AI now represents roughly 30% of the consulting backlog. However, the modest growth rate in consulting disappointed investors who had expected AI demand to accelerate services faster.
Margins expanded across the board
Operating gross profit margin expanded by 110 basis points, adjusted EBITDA margin by 170 basis points, and operating pretax margin by 140 basis points. Management attributed the improvement to productivity gains, revenue scale, and favourable mix.
What happens next
Management reiterated its 2026 outlook of over 5% revenue growth at constant currency and a $1 billion increase to free cash flow. Despite the earnings beat, IBM shares fell approximately 7% in after-hours trading as investors weighed the consulting segment’s slower trajectory against the broader AI tailwind.