IBM RELEASES SECOND-QUARTER RESULTS

ARMONK, N.Y., July 22, 2026 /PRNewswire/ -- IBM (NYSE: IBM) today announced second-quarter 2026 earnings results.

"We are confident in IBM's strategy and portfolio, and in our ability to capture growth opportunities ahead. We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio - across software, infrastructure, and consulting - is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future," said Arvind Krishna, IBM chairman, president and chief executive officer. "In addition, we are taking action to accelerate our revenue growth and profitability, driving productivity across the company with AI and automation, and heavily investing in commercializing innovation at speed and scale. We now expect constant currency revenue growth in the range of four-to-five percent, and we continue to expect free cash flow to increase by about $1 billion year-over-year for the full year."

Full-Year 2026 Expectations

Operational Focus Areas

"Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow," said James Kavanaugh, IBM senior vice president and chief financial officer. "In a quarter like this, it is critical that our financial and operational discipline remains strong and that we continue to invest for growth while returning value to shareholders through our dividend."

SECOND-QUARTER 2026 INCOME STATEMENT SUMMARY Revenue Gross Profit Gross Profit Margin Pre-tax Income Pre-tax Income Margin Net Income Diluted Earnings Per Share GAAP from Continuing Operations $ 17.2 B $ 9.9 B 57.7 % $ 2.5 B 14.4 % $ 2.2 B $ 2.27 Year/Year 1 % (1) % (1.0) Pts (5) % (0.9) Pts (1) % (2) % Operating (Non-GAAP) $ 10.2 B 59.4 % $ 3.3 B 19.2 % $ 2.8 B $ 2.93 Year/Year 0 % (0.7) Pts 3 % 0.3 Pts 5 % 5 %

Segment Results for Second Quarter

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

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

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

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 Financing — revenues of $0.2 billion, up 12 percent, up 11 percent at constant currency

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year to year. IBM's free cash flow was $2.5 billion, down $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the second quarter.

For the first six months of the year, the company generated net cash from operating activities of $7.8 billion, up $1.7 billion year to year. IBM's free cash flow was $4.8 billion, flat year to year.

IBM ended the second quarter with $8.2 billion of cash, restricted cash and marketable securities, down $6.3 billion from year-end 2025. The company invested $10.5 billion in acquisitions this year. Debt, including IBM Financing debt of $13.0 billion, totaled $62.0 billion, up $0.7 billion year to date.

Dividend Declaration

The IBM board of directors approved a regular quarterly cash dividend of $1.69 per common share, to stockholders of record on August 10, 2026. With payment of the September 10, 2026 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI, including the company's increased AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.

Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

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 also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:

adjusting for currency (i.e., at constant currency);

presenting operating (non-GAAP) earnings per share amounts and related income statement items;

free cash flow;

net cash from operating activities excluding IBM Financing receivables;

adjusted EBITDA;

adjusted EBITDA margin.

The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q26. Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

Contact: IBM

Tim Davidson, 914-844-7847

[email protected]

Erin McElwee, 347-920-6825

[email protected]