IBM beats quarter but guidance disappoints

IBM beat Wall Street in the first quarter, but its stock fell after management left its 2026 outlook unchanged. (cnbc.com) International Business Machines reported $15.92 billion in revenue for the quarter ended March 31, up 9% from a year earlier, and adjusted earnings of $1.91 a share, ahead of LSEG estimates for $15.62 billion and $1.81. Shares slipped about 6% in extended trading on April 22 after the report. (cnbc.com) IBM kept its full-year forecast for more than 5% constant-currency revenue growth and about a $1 billion year-over-year increase in free cash flow. Chief Financial Officer James Kavanaugh told analysts, “I don’t think we’ve ever raised guidance in a first quarter,” and said the company wanted to be “a prudent operator.” (cnbc.com) The strongest growth came from the businesses investors watch for signs of durable demand: software revenue rose 11% to about $7.1 billion, consulting rose 4% to $5.27 billion, and infrastructure rose 15% to $3.33 billion. IBM said Z mainframe revenue jumped 51% as its z17 cycle continued. (cnbc.com) (newsroom.ibm.com) Hybrid cloud is IBM’s pitch that large companies will keep running technology across their own data centers and public clouds at the same time, rather than moving everything to one provider. That makes software that can set up, secure and manage those mixed environments valuable even as spending shifts toward artificial intelligence. (newsroom.ibm.com 1) (newsroom.ibm.com 2) That is where HashiCorp fits. IBM closed its $6.4 billion acquisition of HashiCorp on Feb. 27, 2025, and Kavanaugh said on the April 22, 2026 earnings call that February marked the one-year anniversary of the deal and that IBM had seen “record HashiCorp bookings” over the past year through its sales reach. (newsroom.ibm.com) (finance.yahoo.com) IBM also said HashiCorp helped its automation business grow 7% at constant currency and delivered adjusted EBITDA accretion ahead of expectations. In plain terms, IBM is saying the acquisition added to profit faster than it had planned. (news.alphastreet.com) (finance.yahoo.com) The tension in the quarter was not whether IBM can still sell mainframes, middleware and consulting. It was whether those businesses, plus AI products such as watsonx, are growing fast enough for investors who have pushed IBM shares higher on expectations that enterprise AI spending will lift revenue and cash flow. (newsroom.ibm.com) (cnbc.com) Chief Executive Officer Arvind Krishna said AI was “a tailwind” for IBM’s business and that IBM products help clients “orchestrate, deploy and govern AI across hybrid environments.” But by holding guidance steady in April, IBM left investors without a higher target to match the quarter’s beat. (newsroom.ibm.com) (cnbc.com) IBM’s next test is whether the same mix that lifted the March quarter — software growth, HashiCorp cross-selling and the z17 mainframe cycle — is enough to turn AI interest into a higher forecast later in 2026. (newsroom.ibm.com) (cnbc.com)