IBM raised its expectation for year-over-year free cash flow growth to more than $1 billion after third-quarter revenue grew 6% at constant currency. The company kept its full-year constant-currency revenue-growth outlook at 4% to 5%.
Revenue reached $17. 1 billion, up 5% as reported. Software revenue increased 8%, led by 11% growth in Hybrid Cloud, 19% growth in Data and 9% growth in Transaction Processing. Infrastructure revenue rose 4%, while Consulting revenue was flat. Operating pretax margin expanded by 70 basis points to 19. 3%, and operating diluted earnings per share rose 11% to $2.
The company said it closed about two-thirds of large deals that had slipped from the second quarter, with roughly one-quarter of the improvement tied to those deals and the remainder to new business.
The results followed a weaker second quarter, when IBM said customer spending had shifted toward servers, storage and memory ahead of anticipated price increases. Second-quarter Transaction Processing revenue fell 8%, while third-quarter revenue in the business rose 9% as reported. Management said the rebound supported its view that the earlier weakness reflected timing rather than a lasting demand decline.
Transaction Processing remains a qualification on the outlook. Chief Executive Arvind Krishna said he does not expect its double-digit pace to continue and anticipated moderation in the fourth quarter. Chief Financial Officer James Kavanaugh said IBM was conservatively assuming flat full-year growth for the business.
IBM also cited continued Red Hat momentum, stronger demand for AI-related software and growing interest in sovereign AI. Krishna said large enterprises were examining the return on AI spending more closely and that redesigning workflows would be necessary to capture the technology’s full value. IBM plans to discuss the role of acquisitions and related growth synergies in more detail in January.