IBM $IBM slips 6% after Q1 beat; 2026 guidance stays unchanged

IBM $IBM fell 6% in extended trading on April 22 even after the company beat first-quarter estimates, because management left its full-year outlook unchanged. CNBC reported adjusted EPS of $1.91 versus $1.81 expected and revenue of $15.92B versus $15.62B expected. Revenue rose 9% year over year, but the market was looking for a raise, not just a beat.

IBM's earnings release showed software revenue of $7.1B, up 11%, consulting revenue of $5.3B, up 4%, and infrastructure revenue of $3.3B, up 15%. IBM Z revenue rose 51%, gross margin expanded 100 bps to 56.2%, and free cash flow reached $2.2B. Net income was $1.22B, or $1.28 per share. CEO Arvind Krishna said AI remains a tailwind as clients deploy and govern models across hybrid environments.

Adjusted EPS: $1.91 vs $1.81 expected

Revenue: $15.92B vs $15.62B expected

Software: $7.1B, up 11%

Consulting: $5.3B, up 4%

Infrastructure: $3.3B, up 15%; IBM Z up 51%

2026 outlook: more than 5% constant-currency revenue growth and about $1B more free cash flow

The problem for the stock was guidance discipline. IBM reiterated more than 5% constant-currency revenue growth for 2026 and about a $1B year-over-year increase in free cash flow, while finance chief Jim Kavanaugh told analysts the company was taking a prudent stance rather than lifting targets in the first quarter. That left investors to focus on slower consulting growth and the risk that AI enthusiasm is arriving faster than broad enterprise spending.

The next checkpoint is whether software growth and mainframe demand can hold into the June quarter without a guidance bump. If IBM can keep software in double digits and prevent consulting from stalling, the 6% after-hours drop may look like a reset in expectations rather than a verdict on the quarter itself.