Revenue rose 5% to $17.10 billion and operating earnings of $2.95 a share beat the $2.86 estimate. IBM held its revenue growth forecast at 4% to 5% and was indicated down about 5.7% before dawn Thursday.
IBM delivered a beat and a raise on Wednesday. By Thursday morning, its shares had given back a 7% after-hours gain and were pointing lower.
Revenue rose 5% to $17.10 billion, or 6% at constant currency, above the LSEG estimate of $16.82 billion. Operating earnings, IBM's non-GAAP measure, were $2.95 a share against an expected $2.86. Software revenue grew 8% to $7.80 billion, above the $7.66 billion analysts expected. Consulting was flat, up 2% at constant currency, and infrastructure grew 5%.
IBM raised its forecast for growth in free cash flow this year to more than $1 billion, from about $1 billion, after generating about $8 billion in the first nine months, up 8%. It kept its 2026 revenue growth outlook at 4% to 5% in constant currency.
The turn
The shares closed Wednesday at $251.46, up 3.9%, and rose as much as 7.3% in after-hours trading on the results. They then reversed. At 5:33 a.m. Eastern Thursday, IBM was indicated at about $237.22, down 5.7% from the close and roughly 12% below its after-hours high.
The reversal coincided with the earnings call. Chief Executive Arvind Krishna said clients were "getting worried if some of the AI spending [is] completely out of control with no real return," according to accounts of the call. The timing lines up, but the stock also fell in a premarket session where Nasdaq 100 futures were down nearly 2% after several technology results.
What the remark could mean
Krishna's comment can be read two ways, and the difference matters for IBM's own shares.
If he was describing IBM's customers, the comment cuts against the software growth that drove the quarter, and an unchanged revenue forecast after a beat suggests the company sees no acceleration ahead.
If he was describing the market in general, it may even favor IBM, which sells consulting and software aimed at getting measurable returns from AI. Clients worried about runaway spending are potential buyers of that pitch.
There is also a quality question in the numbers. Software gross margin slipped to 82.5% from 83.1%, a small move but in the business investors value most.
What to watch
Whether the premarket decline holds after the open; software growth next quarter against the 8% pace; and whether other enterprise technology companies reporting in the coming weeks describe the same customer caution.