International Business Machines Corporation

Q2 FY26IT Services

International Business Machines Corporation Q2 FY26 Results — Earnings Call Analysis

Q2 FY26 earnings call: what management guided on revenue, margins and order book.

Price₹264

Market cap₹2.5L Cr

P/E22.2

Updated29 May 2026

Read4 min read

What the Q2 FY26 call signalled

3 of 4 strong

RevenueRank 3

MarginRank 2

CapexYes

Order bookYes

Not discussed on this call: fundraise.

The short version

- IBM expects constant currency revenue growth of 5+% in 2026, supported by strong software acceleration. - IBM expects **constant currency revenue growth of 5+% for 2026**.

From International Business Machines Corporation's Q2 FY26 earnings-call transcript · updated 29 May 2026.

Revenue & Sales Performance

Rank 3

IBM expects constant currency revenue growth of 5+% in 2026, supported by strong software acceleration.
Software business projected to grow 10+% for the year, driven by portfolio diversification, innovation, GenAI, and M&A synergies (e.g., Confluent).
Data segment expected to grow in the low 20+% range, contributing 5 points to software growth.
Red Hat growth accelerated to 10%, contributing 2.5 points to IBM's growth.
Hybrid Infrastructure and automation businesses showing strong growth, with IBM Z growing 48% this quarter.
Consulting revenue anticipated to accelerate to low to mid-single digit growth, backed by 30% GenAI backlog penetration.
Infrastructure revenue projected to decline low single digits due to product cycle but expected to improve with AI innovations.
Management confident in sustaining growth, margin expansion, and free cash flow growth (~$1 billion YoY) in 2026.

Profitability & Margins

IBM expects **constant currency revenue growth of 5+% for 2026**.
Software business anticipated to grow **10+% this year**, accelerating from initial guidance.
Consulting revenue growth expected to accelerate to **low to mid-single digits** in 2026.
Infrastructure revenue expected to be down **low single digits**, about a 0.5-point drag.
Operating pre-tax margins targeted to expand by about **1 point** in 2026 despite dilution effects from Confluent.
Operating tax rate forecasted to be in the **mid-teens**.
Free cash flow projected to grow by about **$1 billion year-over-year** in 2026.
Second quarter margin expansion expected at around **50 basis points**.
Adjusted EBITDA and profits up strongly in Q1 (margins expanded by 140 basis points, earnings up nearly 20%, profits up 23%).

See what International Business Machines Corporation said on profitability & margins — free account, 30 seconds.

Capital Expenditure Plans

Yes

IBM continues to invest strategically in innovation and portfolio repositioning, notably in AI and software.
The company anticipates absorbing about $600 million dilution in 2026 due to Confluent acquisition (stock-based compensation and interest expense), while accelerating cost synergies to expand operating pre-tax margins by about 1 point.
Higher CapEx is noted as a headwind alongside higher cash taxes and net interest expense.
IBM leverages strong cash flow and financial flexibility for potential acquisitions, particularly in category-leading technologies with structural growth profiles.
The firm is disciplined in M&A, integrating Confluent fully before considering additional purchases; attractive valuations may increase M&A appetite in the second half of 2026, contingent on sellers' acceptance of new price baselines.
Investment focus remains on fueling growth in software, consulting, and infrastructure innovation, especially around AI and hybrid cloud.

Fundraising & Capital Structure

IBM ended the quarter with $11.8 billion in cash and a solid investment-grade balance sheet.
The company invested $10.5 billion in acquisitions, notably closing Confluent.
Debt balance at quarter-end was $66.4 billion, including $12.8 billion in financing business debt.
No explicit mention of new fundraising through debt or equity in the provided transcript.
Management emphasizes strong liquidity and financial flexibility but remains prudent with guidance.
Potential future acquisitions might occur in the second half of the year, depending on market conditions and cash balances.
Overall, no immediate plans disclosed for raising additional capital via debt or equity as of this call.

See what International Business Machines Corporation said on fundraising & capital structure — free account, 30 seconds.

Order Book & Pipeline

Yes

IBM exited last year with an AI-related book of business exceeding $12.5 billion.
AI is now embedded across IBM’s portfolio, including consulting and software.
Bookings and pipeline demand for the second quarter indicate no signs of slowing down.
Consulting backlog has about 30% penetration from generative AI, supporting revenue growth.
Signings in consulting returned to growth, up 6%, driven by AI-related transformations.
IBM expects steady constant currency revenue growth of 5%+ in 2026.
The company maintains prudent guidance for the year despite a strong start.
Clients are signaling demand for hybrid and multi-cloud solutions, contributing to software development AI product interest (e.g., Project Bob with 200 early sign-ups).
The overall AI bookings momentum is strong and integrated throughout IBM’s business lines.

What International Business Machines Corporation's management said in earlier quarters

Others in IT Services this season

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Applied Digital Corporation (Q2 FY26)
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DigitalOcean Holdings, Inc. (Q2 FY26)
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Akamai Technologies, Inc. (Q2 FY26)
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Frequently Asked Questions

What were International Business Machines Corporation Q2 FY26 results?

- IBM expects constant currency revenue growth of 5+% in 2026, supported by strong software acceleration. - IBM expects **constant currency revenue growth of 5+% for 2026**.

What is International Business Machines Corporation share price analysis?

International Business Machines Corporation currently shows a below-average growth signal. The stock trades at a P/E of 22.2 with a market cap of $248,336. Investors should review the full earnings analysis for detailed insights.

Is International Business Machines Corporation planning capital expenditure?

- IBM continues to invest strategically in innovation and portfolio repositioning, notably in AI and software.

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This analysis is AI-generated based on publicly available earnings data and concall transcripts. This is not investment advice. Please consult a SEBI-registered advisor before making investment decisions.