IBM (IBM) official guidance

Our operating tax rate for the year should be in the mid-teens.

Our third quarter operating tax rate should be in the mid-teens.

We continue to expect to grow free cash flow by about $1 billion this year as we accelerate our productivity initiatives.

Our guide says we stay at that high 120+% throughout 2026 overall.

For operating pre-tax margin, we expect similar performance to the second quarter.

As a result, we now expect to deliver 100 basis points of operating pre-tax margin expansion, with productivity more than offsetting the revenue-related headwinds.

In consulting, the quality of our backlog and momentum in GenAI continue to support an acceleration in revenue growth to low to mid-single digits for the year.

In light of the strong demand environment in Power and Storage, we now expect infrastructure to grow low single digits in 2026, driven by growth in Distributed Infrastructure and continued strong program-to-program performance in IBM Z through the second half of the year.

Given the second quarter shortfall, we are revising our software growth expectation to a range of 6%-8% for the full year.

When we look at the guidance in the second half, I think prudently, when we're looking at 6%-8%, 6% being the anchor, 8% approaching double digits in the second half, we've got TP down low single digits to mid-single digits overall because we're going to look at that as a 2027 growth vector opportunity for us.

We now expect revenue growth for the full year in a range of 4%-5%.

Looking to the third quarter, we expect constant currency revenue growth consistent with the full year.

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.

Last quarter, we disclosed that we anticipated absorbing about $600 million of dilution from Confluent in 2026, driven largely by stock-based compensation and interest expense.

Our second quarter operating tax rate should be in the mid-teens.

The strong start to the year drives our confidence in delivering constant currency revenue growth of 5%+ in 2026 and free cash flow growth of about $1 billion year-over-year.

Since 2023, this has driven $4.5 billion of productivity savings with an additional $1 billion expected in 2026.

For operating pre-tax margin, we expect about 50 basis points of expansion as software mix and productivity are offset by dilution from the early closing of Confluent.

In consulting, the quality of our backlog and momentum in gen AI with backlog penetration at about 30% continue to support an acceleration in revenue growth to low to mid-single digits for the year.

We now see data up low 20%+ range. That's going to deliver 5 points of software growth. That's representative of new innovation, GenAI, the value of our platform-centric model and strategic partnerships, and then also M&A contribution from Confluent, which would be about a little bit north of 15 points of that 20%-25% growth overall for the year.

We are off to a great start with Z17, and four quarters into Z17's launch, we prudently continue to expect infrastructure revenue to be down low single digits for the year, representing about a half a point impact to IBM.

Our revenue expectations are underpinned by our accelerating software business, which we now expect to grow 10%+ this year.

Looking to the second quarter, we expect our constant currency revenue growth rate to be similar to the full year.

That's representative of new innovation, GenAI, the value of our platform-centric model and strategic partnerships, and then also M&A contribution from Confluent, which would be about a little bit north of 15 points of that 20%-25% growth overall for the year.

We prudently continue to expect infrastructure revenue to be down low single digits for the year, representing about a half a point impact to IBM.

Red Hat entered the year, we accelerated. Delivered as expected. We posted 10% growth. Underneath that, contributed 2.5 points to IBM for the year, and we're well-positioned for that.

At current foreign exchange rates, currency is expected to be about a half-point to one-point tailwind to growth for the year

Our first quarter operating tax rate should be in the mid-teens.

For operating pre-tax margin, we expect about 100 basis points of expansion, with workforce rebalancing fairly consistent with the prior year.

We expect to realize about $500 million of operational spend run rate synergies by the end of 2027.

We continue to accelerate our productivity initiatives and now expect an incremental $1 billion of productivity savings this year, driving $5.5 billion of annual run rate savings by the end of 2026.

Automation, great portfolio, low double-digit, 2.5-point contribution to software, on or better than the model.

One, data, high teens, contributing about 4 points to that software growth, well above model.

Two, hybrid cloud. We think that's double digit.

Mainframe, given the very strong cycle we had, somewhere between low to mid-single-digit growth is reasonable, and we have seen that dynamic play through, but it kind of follows the hardware placement by a few quarters.

The piece there that continues to be very, very attractive to growth is OpenShift, which is almost at $2 billion and running at a 30% growth rate. And we expect that to continue both for containers, for hybrid applications, and for virtualization.

We see strong demand in many of the pieces there, including on Red Hat Linux, but that probably in the mid-single digits, more than in the high-teens to double, which is in line with server growth.

Then TP, we're pretty much back to model, low single, mid single digit growth, capitalizing on that economic multiplier.

Looking to the first quarter, we expect our constant currency revenue growth rate to be similar to the full year.

Organic will be north of 7 points this year, and acquisitions about 3 points.

Underpinning that, we got a subscription revenue under contract that's growing mid-teens.

Our annuity portfolio, and I don't think we get a lot of value for this, and we keep bringing it up. Over a $23 billion ARR book of business, we feel we're going to exit the fourth quarter at double digits.

We now expect to deliver revenue growth of more than 5%, adjusted EBITDA growth of mid-teens, and free cash flow of about $14 billion for 2025.

We are raising IBM's full-year operating pre-tax margin expansion to over a point, and our operating tax rate expectation for the year remains in the mid-teens.

Given these results and the momentum in our portfolio, we are raising expectations for revenue growth to more than 5% and free cash flow to about $14 billion for the year.

We are raising IBM's full-year operating pre-tax margin expansion to over a point, and our operating tax rate expectation for the year remains in the mid-teens.

Our Software model shared at Investor Day, approaching double digits, that is all in, that has two to three points, give or take, at each year, maybe a point more and maybe a point less, depending on our discipline capital allocation around M&A of inorganic contribution and six to seven to eight points of organic.

In 2023, we set out on a goal to achieve $2 billion of productivity savings, and today we are well ahead of that with an expectation of $4.5 billion of annual run-rate savings exiting this year.

We see an inflection in growth going forward, with fourth-quarter revenue performance similar to our third-quarter growth.

We've continued to see the Data and AI portfolio grow in the mid to high single digits.

We continue to expect mid-teens growth for Red Hat, albeit at the low end.

When we look at fourth quarter, double digit, solid double digit growth in Red Hat, low teen growth for the year, nice composition of where that acceleration is.

We continue to expect Software revenue growth of approaching double digits for the full year.

While Transaction Processing was down 1% year to date as clients prioritize spend on our high-value innovation z17, the strength of the new cycle provides future monetization value across the Z stack. We are seeing this strength in our pipeline as we enter the fourth quarter, which we expect will return to growth.

Given these results and the momentum in our portfolio, we are raising expectations for revenue growth to more than 5% and free cash flow to about $14 billion for the year.

With continued strength in Z17, we now expect Infrastructure to contribute over 1.5 points to IBM's revenue growth this year.