IBM has published its Q3 2026 results, showing the company is recovering after a disappointing Q2.

Revenue for Q3 totaled $17.1 billion, up five percent Year-on-Year (YoY), compared to Q2's $ 17.1 billion in revenue, which was up just one percent YoY.

The drop during Q2 was mostly down to a shortfall in its infrastructure and software segments, leading to CEO Arvind Krishna to send preliminary financial results in a letter to investors at the time to forewarn and explain the context surrounding this. Infrastructure during Q2 was down seven percent YoY.

In the most recent quarter, however, this has turned around, with all segments showing growth. Infrastructure revenue was $3.7bn, up four percent YoY. Within this, IBM Z was down 20 percent YoY - a trend that is expected within the launch cycle - and Distributed Infrastructure was up 31 percent.

Commenting on IBM Z, IBM's CFO Jim Kavanaugh said: "z17 continues to perform exceptionally well, wrapping up the strongest start to a Z program last year. Program-to-date performance remains well ahead of the prior generation, up over $1 billion, and this quarter, we had the strongest mid-range launch in IBM Z in nearly two decades."

He later emphasized the ongoing importance of the mainframe, telling analysts that "mainframe runs 70 percent of the industry's transaction volumes in terms of value. 45 of the top 50 banks, four of the five top airlines, seven of the top 10 retailers around the world. I think 78 percent [was the] last number I have seen of the Fortune 100 run mainframe as a core architecture."

The dip in Q2 was explained by CEO Krishna at the time: "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."

However, during the Q3 call, he emphasized instead the "tailwind" he sees as AI adoption continues, and there is a greater push for sovereignty.

Noting that he is seeing some clients experimenting with the public cloud with frontier models, he explains: "Sovereign AI is definitely becoming a much larger conversation. While we have talked about it for the last year and a half, I would not tell you that in 2024 it had much traction. In 2025, a few people began to pay some attention, and in 2026 it is now beginning to pick up. Let me explain for everybody else exactly what we mean by that.

"If you are going to use a large public LLM, effectively, while they're certainly not stealing your data, they're implicitly maybe learning what kind of questions are asked. There are traces left in the underlying logs and so on that are not the full, but that do give some indication of what all it is being used for, as well as some elements of the data that is being used. Sovereign becomes: how do you make sure that none of that happens? People are turning now to two kinds of answers. That is why I think there is such a big boom in AI infrastructure on-premise, and we can see some of the companies that benefit from that. But so will we in our mainframe with our Spyre cards as time goes on."

He later added: "I believe this is going to turn into a tailwind for many players in the industry, certainly the infrastructure and semiconductor players, but also for those of us who help enterprises deploy in a secure and in a private way."

The company has generated around $8 billion of free cash flow in the last nine months, up about $600 million YoY and, according to IBM's CFO, driven by about a $1bn increase in Adjusted EBITDA, offset by higher capex, cash taxes, and net interest expense.

For the full year 2026, IBM is now predicting revenue growth between four and five percent, and free cash flow to increase by more than $1 billion YoY.

Other key metrics for the quarter include a gross profit margin of 56.8 percent, up 0.5 percentage points YoY, and a net income of $2.2bn, up 26 percent YoY.