IBM · 10-Q · 2026Q2 · Full report
Operating Expense Trends
INTERNATIONAL BUSINESS MACHINES CORP · 2026-07-23 · Importance 60 · Surprise 40 · No source text
Total expense and other income increased 0.7% to $7.428 billion in the second quarter and 5.2% to $14.991 billion for the first half. R&D expense increased 10.2% to $2.311 billion in the quarter and 10.8% to $4.485 billion year to date, driven by organic and acquired investments in AI, hybrid cloud and quantum. SG&A declined 0.9% to $4.981 billion in the quarter as productivity savings exceeded acquired-business costs, but increased 1.6% to $10.071 billion for the first half because of acquired businesses, currency, amortization and acquisition charges. Operating non-GAAP expense declined 1.5% in the quarter to $6.903 billion and increased 3.4% year to date to $13.961 billion.
Key facts
- Total unrecognized compensation cost related to non-vested awards at June 30, 2026 was $2.4 billion and is expected to be recognized over a weighted-average period of approximately 2.2 years. source
- Operating (non-GAAP) earnings for the three months ended June 30, 2026: $2,792 million, up 5.3% year-to-year source
- Total expense and other (income) for the three months ended June 30, 2026: $7,428 million, up 0.7% year-to-year; operating (non-GAAP) expense and other (income): $6,903 million, down 1.5% year-to-year source
- Total SG&A expense for the three months ended June 30, 2026: $4,981 million, decreased 0.9% year-to-year; operating (non-GAAP) SG&A expense: $4,560 million, decreased 2.5% source
- Operating (non-GAAP) pre-tax income from continuing operations for the three months ended June 30, 2026: $3.3 billion, increased 2.9% year-to-year; operating (non-GAAP) pre-tax margin 19.2%, up 0.3 points source
- Total SG&A selling, general and administrative — other for the six months ended June 30, 2026: $7,820 million, decreased 0.8% year-to-year; total selling, general and administrative expense for six months: $10,071 million, up 1.6% source
- The company expects to adopt the 'Disaggregation of Income Statement Expenses' guidance for annual periods beginning in 2027 and interim periods beginning January 1, 2028, applying the guidance prospectively. source
- New accounting guidance for internal-use software capitalization issued September 2025 is effective for the company for annual and interim reporting periods beginning January 1, 2028; the company is evaluating the impact. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| operating_income | negative | committed | -11.9% | Total unrecognized compensation cost related to non-vested awards at June 30, 2026 was $2.4 billion and is expected to be recognized over… |
| operating_income | negative | realized | -0.9% | Total SG&A selling, general and administrative — other for the six months ended June 30, 2026: $7,820 million, decreased 0.8%… |
| operating_income | positive | realized | +0.8% | Operating (non-GAAP) earnings for the three months ended June 30, 2026: $2,792 million, up 5.3% year-to-year |
| operating_income | positive | realized | +0.7% | Total SG&A expense for the three months ended June 30, 2026: $4,981 million, decreased 0.9% year-to-year; operating (non-GAAP) SG&A… |
| operating_income | positive | realized | +0.6% | Total expense and other (income) for the three months ended June 30, 2026: $7,428 million, up 0.7% year-to-year; operating (non-GAAP)… |
| operating_income | positive | realized | +0.5% | Operating (non-GAAP) pre-tax income from continuing operations for the three months ended June 30, 2026: $3.3 billion, increased 2.9%… |
| margin | positive | realized | +0.3% | Operating (non-GAAP) pre-tax income from continuing operations for the three months ended June 30, 2026: $3.3 billion, increased 2.9%… |
| operating_income | negative | realized | -0.3% | Total expense and other (income) for the three months ended June 30, 2026: $7,428 million, up 0.7% year-to-year; operating (non-GAAP)… |
| operating_income | positive | realized | +0.3% | Total SG&A expense for the three months ended June 30, 2026: $4,981 million, decreased 0.9% year-to-year; operating (non-GAAP) SG&A… |
| operating_income | unclear | probable | — | The company expects to adopt the 'Disaggregation of Income Statement Expenses' guidance for annual periods beginning in 2027 and interim… |
| assets | unclear | probable | — | New accounting guidance for internal-use software capitalization issued September 2025 is effective for the company for annual and interim… |
| operating_income | negative | realized | — | Research and development expense for the three months ended June 30, 2026: $2,311 million; for six months ended June 30, 2026: $4,485… |