IBM filed its 10-Q with the SEC, and its figures are now in our data. Revenue over the twelve months to Q3 2026 was $69.87 billion, which rose 6.8% on the year before. That growth rate was down 1.1 percentage points on the rate a quarter earlier.
What stands out
Reported profit and cash are moving at different speeds. Net income rose 41.3% over the year while free cash flow rose 17.5%.
Growth and profit
The company converted its sales into profit at a high rate. The trailing gross margin was 58.0%. The trailing net margin was 16.0%. Net income over the twelve months was $11.17 billion, which rose 41.3% on the year before.
Cash flow
Operating cash flow over the twelve months was $15.83 billion, up 17.4% on the year before. Capital spending was $1.18 billion, or 1.7% of revenue. Free cash flow, operating cash flow less capital spending, was $14.66 billion, up 17.5% on the year before. Free cash flow was 21.0% of revenue (the free-cash-flow margin), up 1.9 percentage points from a year earlier. The average diluted share count rose 0.3% over the year.
In context
Today’s free-cash-flow margin of 21.0% is higher than 85% of the company’s own past quarterly readings, which have ranged from 12.6% to 32.5%. Today’s twelve-month revenue growth rate of 6.8% is higher than 90% of the company’s own past quarterly readings, which have ranged from −28.0% to 42.2%.
Guidance
The company raised its full-year 2026 guidance for free cash flow (adjusted): $1.0 billion.
What it means for value
In our model, growth 5 percentage points lower would lower the value by 30.9%, and 5 percentage points higher would raise it by 40.3%. A free-cash-flow margin 1 percentage point lower would lower it by 5.4%.
What to watch
The next filing will show whether the divergence between net income and free cash flow continues. It will also reveal if the free-cash-flow margin holds its position above the historical median. Investors should look for changes in the average diluted share count.
