IBM

Y. , July 14, 2026 /PRNewswire/ -- IBM Investors – This morning we are releasing selected preliminary second-quarter 2026 financial results. We are still working to close our financial reporting for the quarter and our final results could be slightly different. For the second quarter: Revenue: Profit: Cash Flow: EPS: I want to spend some time explaining what we experienced in the quarter that led to the Software and Infrastructure performance shortfall you see above. When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter.

Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter. What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns.

While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter. These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall. These are not excuses, but they are realities. Our job is to help our clients through uncertainty, to find paths forward to grow their businesses no matter what is happening in the external environment.

While our second-quarter results are disappointing, our performance in many areas showed strength, reinforcing the conviction we have in our portfolio and strategy. Importantly, we continue to innovate at speed and scale. After the introduction of Mythos, our teams across IBM and Red Hat quickly mobilized to take advantage of an unprecedented opportunity, launching Lightwell. Lightwell is a $5 billion commitment backed by new frontier AI capabilities and a global force of more than 20,000 engineers creating a trusted enterprise clearinghouse to address open source software vulnerabilities.

Early adopters include organizations like Bank of America, BNY, Citi, Goldman Sachs, JPMorganChase, Mastercard, Morgan Stanley, Royal Bank of Canada, State Street, Visa, Wells Fargo and more. General availability of Lightwell was announced on July 8. Finally, quantum computing is no longer decades away, it is upon us, and we are investing aggressively. S. Department of Commerce, we announced a letter of intent to build Anderon, the world's first pure-play quantum wafer foundry supported by $1 billion in CHIPS incentives provided by the DoC and a $1 billion cash contribution by IBM.

Shortly after that, we disclosed plans to invest more than $10 billion in quantum over the next five years, spanning R&D, capex, manufacturing scaling, M&A and ecosystem expansion. We remain on track to deliver the first large-scale fault-tolerant quantum computer by 2029. While performance in the quarter was below our expectations, we have conviction in the strength of our portfolio and the strategic transformation of our business. To remedy challenges this quarter, we are undertaking new initiatives and accelerating others, all to improve our results going forward.

We will hold our regularly scheduled conference call with you all on July 22, 2026, at 5PM ET to go into deeper detail and discuss our full-year expectations. Arvind Krishna Chairman, President and Chief Executive Officer, IBM (NYSE: IBM ) Forward-Looking and Cautionary Statements Except for the historical information and discussions contained herein, statements contained in this letter 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.

S. Securities and Exchange Commission or in materials incorporated therein by reference. Any forward-looking statement in this letter 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. 2 in the Form 8-K that includes this letter and is being submitted today to the SEC. m. ET. com/investor/events/earnings-2q26 . Presentation charts will be available shortly before the Webcast. Selected Financial Information Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

S. 80 (1) Includes amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as financing costs. (2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs. INTERNATIONAL BUSINESS MACHINES CORPORATION GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION (Unaudited) ($ in millions) Six Months Ended June 30, 2026 Net cash provided by operating activities per GAAP $ 7,766 Less: change in IBM Financing receivables 2,264 Net cash from operating activities excl.