IBM Posts $16bn Q2 Revenue as AI-Linked Software Outpaces Hardware

July 23, 2026
By Mintesinot Nigussie

IBM reported second-quarter revenue of 16 billion US dollars as growth in software businesses tied to artificial intelligence and hybrid cloud services helped offset declines in its infrastructure segment. Software revenue rose five percent year-on-year to 7.8 billion US dollars during the quarter, driven by stronger demand for AI-ready platforms, cloud solutions and data management tools. Revenue from Red Hat’s hybrid cloud business increased 11 percent, while data software revenue jumped 19 percent.

The results highlight the growing contribution of IBM’s AI-focused portfolio as enterprises move from testing artificial intelligence applications towards wider deployment, the company said. "Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow," said James Kavanaugh, IBM’s senior vice-president and chief financial officer.

IBM Chairman, President and Chief Executive Officer Arvind Krishna said the company remains positioned to benefit from a structural shift in business driven by artificial intelligence adoption. "We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio — across software, infrastructure, and consulting — is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future," Krishna said.

Consulting revenue was unchanged at 5.3 billion US dollars, while infrastructure revenue declined seven percent to 3.8 billion US dollars. The decline was largely driven by a 42 percent fall in IBM Z revenue, although distributed infrastructure revenue increased 37 percent. IBM said its distributed infrastructure business continued to benefit from demand linked to AI workloads, with Power and Storage businesses recording strong performance and contributing to an order backlog of nearly 500 million US dollars.

The company generated 2.6 billion US dollars in net cash from operating activities during the quarter, up 900 million US dollars from a year earlier. Free cash flow stood at 2.5 billion US dollars, down from 2.8 billion US dollars in the same period last year. IBM returned 1.6 billion US dollars to shareholders through dividends during the quarter. The company ended June with 8.2 billion US dollars in cash, restricted cash and marketable securities, while total debt stood at 62 billion US dollars.

Source: FSX Business News