IBM · 10-Q · 2026Q3 · Full report

Gross Margin Drivers

INTERNATIONAL BUSINESS MACHINES CORP · 2026-10-22 · Importance 31 · Surprise 32 · No source text

Third-quarter 2026 gross margin decreased 0.5 percentage points to 56.8%, while nine-month gross margin decreased 0.3 points to 56.9%. Third-quarter Software gross margin declined 0.6 points to 82.5%, Consulting declined 1.9 points to 27.4%, and Infrastructure declined 0.4 points to 56.7%. Software margin pressure reflected investments in innovation and product mix, while Consulting margin pressure reflected investments in digital assets supporting the AI opportunity. Infrastructure margin declines reflected product mix, partially offset by improved Distributed Infrastructure margins.

Key facts

• Software gross profit for the three months ended September 30, 2026 was $6,436 million, with a gross profit margin of 82.5% (a decrease of 0.6 points year to year). source
• Gross profit for the three months ended September 30, 2026 was $9,714 million and operating (non-GAAP) gross profit was $10,004 million; GAAP gross profit margin was 56.8% and operating (non-GAAP) gross profit margin was 58.5%. source
• Gross profit for the nine months ended September 30, 2026 was $28,571 million and operating (non-GAAP) gross profit was $29,384 million; GAAP gross profit margin was 56.9% and operating (non-GAAP) gross profit margin was 58.6%. source
• Consulting gross profit for the three months ended September 30, 2026 was $1,462 million, with a gross profit margin of 27.4%, a decrease of 1.9 points year to year. source
• Gross profit for the three months ended September 30, 2026: $9,714 million. source
• The company said software gross profit margin declines for the third quarter and first nine months of 2026 were primarily driven by investments in innovation and product mix. source
• Total gross margin for the three months ended September 30, 2026 was 56.8%, a decrease of 0.5 percentage points year to year. source

Impact estimates