Full Breakdown
IBM Raises Software Revenue Outlook as Deferred Deals Come Back
By Drooid · · How we work
Third-Quarter Financial Highlights
IBM reported third-quarter revenue of $17.10 billion, a 4.7% increase year-over-year and above analysts’ average estimate of $16.82 billion compiled by LSEG. Adjusted earnings came in at $2.95 per share, beating the consensus of $2.86. The software segment grew 8.3% to $7.80 billion, surpassing the $7.62 billion Wall Street forecast. Infrastructure revenue rose 4.2% to $3.71 billion, helped by a 31% jump in distributed-infrastructure sales that offset weakness in the Z mainframe line.
Recovery of Deferred Infrastructure and Transaction-Processing Deals
Chief Financial Officer Jim Kavanaugh explained that roughly 25% of the quarter’s transaction-processing software revenue stemmed from deals postponed in the prior quarter, while the remaining 75% represented net-new business. He added that about two-thirds of the mainframe-related hardware and software contracts delayed earlier in the year have now been signed, restoring the pipeline that had been disrupted by temporary shifts in customer spending toward chips and servers.
Outlook and Market Reaction
Following the earnings release, IBM’s shares climbed about 4% in extended trading, with Bloomberg noting a 5% rise after the stock closed at $251.46 in New York. For the full fiscal year, IBM now projects free-cash-flow growth of more than $1 billion, an upgrade from the earlier expectation of roughly $1 billion.
Why It Matters
The rebound in delayed software and infrastructure deals signals that IBM’s strategy to reposition itself as a high-growth software company—bolstered by past acquisitions such as Red Hat, HashiCorp, and Confluent—is gaining traction. Restoring confidence among investors and customers may also mitigate earlier concerns that AI-driven market shifts could erode demand for traditional mainframe and software offerings.