IBM 10-Q filed 2026-10-22 | Key takeaways
IBM filed its 10-Q; the most relevant disclosure change is expanded Acquisitions, Divestitures and Other Transactions: Completed four acquisitions totaling $12.6 billion (Confluent $11.3B, plus three others) during nine months ended September 30, 2026; divested joint venture September 30, 2026; finalized CHIPS Act award for Anderon quantum foundry (up to $1B incentive, $650M a.
Key takeaways
Software was the fastest-growing segment at $7.804 billion (+8.2% YoY), with Data up 19.1% reflecting the Confluent integration and Transaction Processing rebounding 9.3% after a Q2 shortfall.
Infrastructure mix was bifurcated: Distributed Infrastructure grew 31.3% on Storage and Power strength, while IBM Z declined 19.6% on product cycle dynamics; segment total was $3.707 billion (+4.2% YoY).
Consulting was essentially flat at $5.335 billion (+0.2% YoY), with revenue growth lagging the other reportable segments in the quarter.
IBM completed four acquisitions in the nine months ended September 30, 2026 totaling $12.6 billion, with the $11.3 billion Confluent deal (closed March 17, 2026 at $31.00 per share) integrated into Software.
Anderon LLC finalized a CHIPS Act award agreement with the U.S. Department of Commerce on September 14, 2026 providing up to $1.0 billion in incentives ($650 million at closing, $350 million upon milestones); IBM contributed $1.0 billion in cash plus intellectual property and assets and retains controlling ownership.
Q3 2026 free cash flow was $3.0 billion, up $0.7 billion year over year, and nine-month free cash flow was $7.787 billion, supporting a Q4 2026 dividend of $1.69 per share (declared October 21, 2026, payable December 10, 2026).
Capital structure shifted during the period: total debt rose to $63.817 billion (up $2.557 billion since December 31, 2025), while cash and marketable securities fell to $11.106 billion; IBM issued $2 billion of Canadian dollar fixed-rate notes in August 2026 with coupons of 4.1%–4.75% and 4–8 year maturities.
Key metrics
Disclosure changes
- Acquisitions, Divestitures and Other Transactions
Completed four acquisitions totaling $12.6 billion (Confluent $11.3B, plus three others) during nine months ended September 30, 2026; divested joint venture September 30, 2026; finalized CHIPS Act award for Anderon quantum foundry (up to $1B incentive, $650M at closing, $350M upon milestones)
Major acquisition activity impacts revenue recognition, goodwill, intangible amortization, and stock-based compensation; CHIPS Act award represents new strategic quantum initiative; Anderon minority interest affects noncontrolling interests - Noncontrolling interests
Noncontrolling interests increased to $669 million at September 30, 2026 from $93 million at December 31, 2025, primarily due to Anderon minority equity interest issued to U.S. Department of Commerce
Significant increase reflects CHIPS Act structuring; Anderon is consolidated with Department's minority equity interest presented as noncontrolling interest - Revenue recognition - RPO
RPO at September 30, 2026 was approximately $69 billion (up from $68 billion at June 30, 2026); 70% expected to be recognized in subsequent two years, 27% in three to five years
Growing RPO provides visibility into future revenue; increase from prior quarter indicates strong pipeline - Segment reporting - Software ARR
Software annual recurring revenue (ARR) was $24.9 billion at Q3 2026, increased approximately $2 billion YoY; OpenShift ARR approximately $2.4 billion
ARR is key metric for Software segment health; slight increase from Q2 demonstrates continued growth in recurring revenue base - Borrowings - Canadian dollar notes
Issued $2 billion Canadian dollar fixed-rate notes in August 2026 with maturities of 4-8 years and coupons of 4.1-4.75%; added CAD 1.9 billion to other currencies debt at September 30, 2026
New currency diversification in debt portfolio; affects reported debt levels and foreign exchange exposure - Goodwill
Goodwill increased to $74.9 billion at September 30, 2026 from $67.7 billion at December 31, 2025, primarily from Confluent acquisition ($7.2 billion); total additions of $7.5 billion in nine months 2026
Large goodwill balance from acquisitions; impairment testing important for investors; no goodwill impairment recorded
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