Financial Analysis

COMMITMENTS & CONTINGENCIES Commitments The companys extended lines of credit to third-party entities include unused amounts of $1.7 billion and $1.6 billion at December 31, 2025 and 2024, respectively. A portion of these amounts was available to the companys business partners to support their working capital needs. In addition, the company has committed to provide future financing to its clients in connection with client purchase agreements for $1.9 billion and $2.2 billion at December 31, 2025 and 2024, respectively. The company collectively evaluates the allowance for these arrangements using a provision methodology consistent with the portfolio of the commitments. Refer to note A, Significant Accounting Policies, for additional information. The allowance for these commitments is recorded in other liabilities in the Consolidated Balance Sheet and was not material at December 31, 2025 and 2024. The company has applied the guidance requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantors performance is remote. The following is a description of arrangements in which the company is the guarantor. The company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by the company, under which the company customarily agrees to hold the party harmless against losses …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

BORROWINGS Short-Term Debt The companys total short-term debt at December 31, 2025 and 2024 was $6,424 million and $5,089 million, respectively, and primarily consisted of current maturities of long-term debt detailed in Long-Term Debt below. Long-Term Debt Pre-Swap Borrowing ($ in millions) At December 31: Maturities 2025 2024 U.S. dollar debt (weighted-average interest rate at December 31, 2025): (1) 5.1% 2025 1,601 3.7% 2026 5,800 5,800 3.3% 2027 4,119 4,119 4.8% 2028 2,319 1,313 3.6% 2029 3,757 3,750 3.2% 2030 2,355 1,350 4.8% 2031 500 500 4.6% 2032 2,700 1,850 4.8% 2033 750 750 4.9% 2034 1,000 1,000 5.2% 2035 900 8.0% 2038 83 83 4.5% 2039 2,745 2,745 2.9% 2040 650 650 4.0% 2042 1,107 1,107 5.3% 2044 1,000 1,000 7.0% 2045 27 27 4.7% 2046 650 650 4.3% 2049 3,000 3,000 3.0% 2050 750 750 4.2% 2052 1,400 1,400 5.1% 2053 650 650 5.3% 2054 1,400 1,400 5.7% 2055 1,000 7.1% 2096 316 316 $ 38,979 $ 35,813 Euro debt (weighted-average interest rate at December 31, 2025): (1) 1.6% 2025 3,106 2.3% 2027 2,349 2,071 0.7% 2028 2,114 1,863 1.5% 2029 1,174 1,035 1.7% 2030 2,055 1,035 2.7% 2031 2,936 2,588 0.7% 2032 1,879 1,656 3.2% 2033 1,292 1.3% 2034 1,174 1,035 3.8% 2035 1,174 1,035 3.5% 2037 1,057 1.2% 2040 998 880 4.0% 2043 1,174 1,035 3.8% 2045 881 $ 20,258 $ 17,340 Other currencies (weighted-average interest rate at December 31, 2025): (1) Pound sterling (4.9%) 2038 1,009 939 Japanese yen (1.0%) 20262028 811 808 Other (13.8%) 20262027 78 212 $ 61,134 $ 55,111 Finance lease obligatio …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"The following tables provide details of revenue by major products/service offerings and revenue by geography. Revenue by Major Products/Service Offerings ($ in millions) For the year ended December 31: 2025 2024 (1) 2023 (1) Hybrid Cloud $ 7,327 $ 6,490 $ 5,827 Automation 7,733 6,558 6,008 Data 6,299 5,629 5,461 Transaction Processing 8,603 8,408 7,714 Total Software $ 29,962 $ 27,085 $ 25,011 Strategy and Technology $ 11,537 $ 11,488 $ 11,430 Intelligent Operations 9,518 9,204 9,455 Total Consulting $ 21,055 $ 20,692 $ 20,884 Hybrid Infrastructure $ 10,618 $ 8,913 $ 9,215 Infrastructure Support 5,100 5,107 5,377 Total Infrastructure $ 15,718 $ 14,020 $ 14,593 Financing (2) $ 737 $ 713 $ 741 Other (3) $ 63 $ 243 $ 632 Total Revenue $ 67,535 $ 62,753 $ 61,860 (1) Recast to reflect January 2025 changes to the reported revenue categories within Software and Consulting segments. (2) Contains lease and loan financing arrangements which are not subject to the guidance on revenue from contracts with customers. (3) Includes reductions in revenue for estimated residual value less related unearned income on sales-type leases, which reflects the new z17 launch in June 2025. Refer to note A, ""Significant Accounting Policies,"" for additional information. 2024 and 2023 include The Weather Company divested business which closed on January 31, 2024. Refer to note E, ""Acquisitions & Divestitures,"" for additional information."

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"STOCK-BASED COMPENSATION The following table presents total stock-based compensation cost included in income from continuing operations. ($ in millions) For the year ended December 31: 2025 2024 2023 Cost $ 269 $ 223 $ 190 SG&A expense 904 690 616 R&D expense 542 398 328 Pre-tax stock-based compensation cost 1,715 1,311 1,133 Income tax benefits (740) (469) (290) Net stock-based compensation cost $ 975 $ 842 $ 843 The companys total unrecognized compensation cost related to non-vested awards at December 31, 2025 was $2.3 billion and is expected to be recognized over a weighted-average period of approximately 2.5 years. Capitalized stock-based compensation cost was not material at December 31, 2025, 2024 and 2023. Incentive Awards Stock-based incentive awards are provided to employees under the terms of the companys long-term performance plans (the Plans). The Plans are administered by the Executive Compensation and Management Resources Committee of the Board of Directors. Awards available under the Plans principally include restricted stock units (RSUs), performance share units (PSUs), stock options or any combination thereof. There were 280 million shares originally authorized to be awarded under the companys existing Plans and 66 million shares granted under previous plans that, if and when those awards were cancelled, could be reissued under the existing Plans. At December 31, 2025, 41 million unused shares were available to be granted. Stock Awards Stock awards f …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

"INTANGIBLE ASSETS INCLUDING GOODWILL Intangible Assets The following tables present the companys intangible asset balances by major asset class. ($ in millions) At December 31, 2025: Gross Carrying Amount Accumulated Amortization Net Carrying Amount (1) Intangible asset class Capitalized software $ 1,388 $ (424) $ 964 Client relationships 11,261 (5,602) 5,659 Completed technology 7,399 (4,096) 3,304 Patents/trademarks 2,030 (665) 1,365 Other (2) 139 (40) 99 Total $ 22,218 $ (10,827) $ 11,391 ($ in millions) At December 31, 2024: Gross Carrying Amount Accumulated Amortization Net Carrying Amount (1) Intangible asset class Capitalized software $ 1,282 $ (492) $ 790 Client relationships 9,704 (4,387) 5,317 Completed technology 6,297 (3,164) 3,132 Patents/trademarks 1,826 (519) 1,307 Other (2) 138 (24) 114 Total $ 19,247 $ (8,587) $ 10,660 (1) Amounts at December 31, 2025 and 2024 include an increase in the net intangible asset balance of $182 million and a decrease in the net intangible asset balance of $126 million, respectively, due to foreign currency translation. (2) Other intangibles are primarily acquired proprietary and nonproprietary technology licenses, data, business processes, methodologies and systems. There was no impairment of intangible assets recorded in 2025 and 2024. The net carrying amount of intangible assets increased $731 million during the year ended December 31, 2025, primarily due to additions of acquired intangibles from business combinations of $2,491 …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

TAXES ($ in millions) For the year ended December 31: 2025 2024 2023 Income/(loss) from continuing operations before income taxes U.S. operations (1) $ (236) $ (3,405) $ (227) Non-U.S. operations 10,564 9,202 8,917 Total income from continuing operations before income taxes $ 10,328 $ 5,797 $ 8,690 (1) 2024 includes the impact of a pension settlement charge of $2.7 billion. Refer to note U, Retirement-Related Benefits, for additional information. The components of the income from continuing operations provision for/(benefit from) income taxes by taxing jurisdiction were as follows: ($ in millions) For the year ended December 31: 2025 2024 2023 U.S. federal Current $ (1,722) $ (335) $ 560 Deferred (119) (2,204) (1,371) $ (1,842) $ (2,539) $ (811) U.S. state and local Current $ 135 $ 152 $ 127 Deferred (130) (335) (162) $ 5 $ (183) $ (34) Non-U.S. Current $ 2,303 $ 2,301 $ 1,594 Deferred (708) 203 428 $ 1,595 $ 2,504 $ 2,022 Total continuing operations provision for/(benefit from) income taxes $ (242) $ (218) $ 1,176 Discontinued operations provision for/(benefit from) income taxes $ (20) $ 6 $ (9) Total provision for/(benefit from) income taxes $ (262) $ (212) $ 1,167 In addition to the total provision for/(benefit from) income taxes, net income includes social security, real estate, personal property and other taxes of approximately $3.0 billion in 2025. A reconciliation of the statutory U.S. federal tax rate to the companys effective tax rate from continuing operations was a …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

"LEASES Accounting for Leases as a Lessee The following table presents the various components of lease costs. ($ in millions) For the year ended December 31: 2025 2024 2023 Finance lease cost $ 331 $ 229 $ 114 Operating lease cost 1,027 1,018 1,013 Short-term lease cost 6 9 9 Variable lease cost 300 321 331 Sublease income (25) (39) (61) Total lease cost $ 1,639 $ 1,537 $ 1,406 The company did not have any sale and leaseback transactions for the year ended December 31, 2025. The company had net gains on sale and leaseback transactions of $17 million and $145 million for the years ended December 31, 2024 and 2023, respectively. The following table presents supplemental information relating to the cash flows arising from lease transactions. Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating and finance lease liabilities, and, as such, are excluded from the amounts below. ($ in millions) For the year ended December 31: 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from finance leases $ 58 $ 43 $ 16 Financing cash outflows from finance leases 280 189 75 Operating cash outflows from operating leases 1,011 961 961 ROU assets obtained in exchange for new finance lease liabilities 444 698 355 ROU assets obtained in exchange for new operating lease liabilities 658 988 1,220 The following table presents the weighted-average lease term and discount rate for f …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

New Standards to be Implemented Intangibles - Goodwill and Other - Internal-Use Software Standard/Description Issuance date: September 2025. This guidance requires internal-use software development cost capitalization to begin when both of the following occur: management has authorized and committed to funding the software project and, it is probable the project will be completed and the software will be used to perform its intended function. This guidance eliminates accounting considerations of software development stages. Effective Date and Adoption Considerations The guidance is effective for the company for annual and interim reporting periods beginning January 1, 2028. Early adoption is permitted. Effect on Financial Statements or Other Significant Matters The company is evaluating the impact of the guidance in the consolidated financial results. Disaggregation of Income Statement Expenses Standard/Description Issuance date: November 2024. This guidance requires a new tabular disclosure of certain types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) that are included within commonly presented expense captions on the income statement. The guidance also requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Additionally, the guidance requires the disclosure of the total amount of selling expenses and an entity s def …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

RETIREMENT-RELATED BENEFITS Description of Plans IBM sponsors the following retirement-related plans/benefits: Plan Eligibility Funding Benefit Calculation Other U.S. Defined Benefit (DB) Pension Plans IBM Personal Pension Plan (Qualified PPP) which includes the Retirement Benefit Account (RBA) as of January 1, 2024 U.S. regular, full-time and part-time employees hired prior to January 1, 2005 RBA - U.S. regular, full-time and part time employees with at least one year of service on or after January 1, 2024 Any company contributions, required or voluntary, are to an irrevocable trust fund, held for the sole benefit of participants and beneficiaries Vary based on the participant: Based on average earnings, years of service and age Cash balance formula based on percentage of employees annual salary, as well as an interest crediting rate (includes RBA as of January 1, 2024) Excluding RBA, benefit accruals ceased December 31, 2007 Certain defined benefit pension obligations and related plan assets were transferred in 2024, as described under IBM Retirement Plan Changes, below Excess Personal Pension Plan (Excess PPP) U.S. regular, full-time and part-time employees hired prior to January 1, 2005 Unfunded, provides benefits in excess of IRS limitations for qualified plans Benefit accruals ceased December 31, 2007 Supplemental Executive Retention Plan (Retention Plan) Eligible U.S. executives Unfunded Based on average earnings, years of service and age U.S. Defined Contribution (DC) …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

"REVENUE RECOGNITION Disaggregation of Revenue In the first quarter of 2025, the company made changes to the reported revenue categories within its Software and Consulting reportable segments to better reflect the market opportunities and how IBM addresses them. Beginning January 1, 2025, the company reports revenue for Hybrid Cloud (Red Hat), Automation, Data and Transaction Processing within Software; and it no longer reports revenue for Hybrid Platform & Solutions. Within Consulting, the company reports revenue for Strategy and Technology and Intelligent Operations. These changes did not impact the companys Consolidated Financial Statements or its reportable segments. The following tables provide details of revenue by major products/service offerings and revenue by geography. Revenue by Major Products/Service Offerings ($ in millions) For the year ended December 31: 2025 2024 (1) 2023 (1) Hybrid Cloud $ 7,327 $ 6,490 $ 5,827 Automation 7,733 6,558 6,008 Data 6,299 5,629 5,461 Transaction Processing 8,603 8,408 7,714 Total Software $ 29,962 $ 27,085 $ 25,011 Strategy and Technology $ 11,537 $ 11,488 $ 11,430 Intelligent Operations 9,518 9,204 9,455 Total Consulting $ 21,055 $ 20,692 $ 20,884 Hybrid Infrastructure $ 10,618 $ 8,913 $ 9,215 Infrastructure Support 5,100 5,107 5,377 Total Infrastructure $ 15,718 $ 14,020 $ 14,593 Financing (2) $ 737 $ 713 $ 741 Other (3) $ 63 $ 243 $ 632 Total Revenue $ 67,535 $ 62,753 $ 61,860 (1) Recast to reflect January 2025 changes to t …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"SEGMENTS The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (Chairman, President and Chief Executive Officer) in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. Certain transactions between the segments are recorded to other (income) and expense and are reflected in segment profit. The company utilizes globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a considerable amount of expense is shared by all of the segments. This shared expense includes sales coverage, certain marketing functions and support functions such as Accounting, Treasury, Procurement, Legal, Human Resources, Chief Information Office, and Billing and Collections. Where practical, shared expenses are allocated based on measurable drivers of expense, e.g., headcount. When a clear and measurable driver cannot be identified, shared expenses are allocated on a financial basis that is consistent with the companys management system, e.g., advertising expense is allocated based on the gross profits of the segments. A portion of the shared expenses, which are recorded in net income, are not allocated to the segments. These expenses are associate …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

EQUITY ACTIVITY The authorized capital stock of IBM consists of (i) 4,687,500,000 shares of common stock with a $0.20 per share par value, of which 936,952,129 shares were outstanding at December 31, 2025, and (ii) 150,000,000 shares of preferred stock with a $0.01 per share par value, whereby 75,000,000 shares have been designated as Series A Preferred Stock, of which 57,916,244 shares of Series A Preferred Stock were issued to a wholly owned subsidiary of the company but were not outstanding at December 31, 2025. The company does not intend to issue or transfer any shares of Series A Preferred Stock to any third parties. Stock Repurchases The Board of Directors authorizes the company to repurchase IBM common stock. The company suspended its share repurchase program at the time of the Red Hat acquisition in 2019. At December 31, 2025, $2,008 million of Board common stock repurchase authorization was available. Other Stock Transactions The company issued the following shares of common stock as part of its stock-based compensation plans and employees stock purchase plan: 11,454,210 shares in 2025, 12,253,153 shares in 2024, and 9,794,240 shares in 2023. The company issued 3,023,129 treasury shares in 2025, 2,454,155 treasury shares in 2024, and 2,080,983 treasury shares in 2023, as a result of RSU releases and exercises of stock options by employees of certain acquired businesses and by non-U.S. employees. Also, as part of the companys stock-based compensation plans, 3,815,280 …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

SUBSEQUENT EVENTS On January 28, 2026, the company announced that the Board of Directors approved a quarterly dividend of $1.68 per common share. The dividend is payable March 10, 2026 to stockholders of record on February 10, 2026. On February 3, 2026, the company issued $3.25 billion of U.S. dollar fixed-rate notes in tranches with maturities ranging from 3 to 30 years and coupons ranging from 4.0 to 5.8 percent; and $3.3 billion of Euro fixed-rate notes in tranches with maturities ranging from 5 to 12 years and coupons ranging from 3.0 to 3.85 percent; and $0.9 billion of Euro floating-rate notes with a maturity of 2 years

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Borrowings: Short-Term Debt The company's total short-term debt at June 30, 2026 and December 31, 2025 was $5,775 million and $6,424 million, respectively, and primarily consisted of current maturities of long-term debt detailed in Long-Term Debt below. Long-Term Debt Pre-Swap Borrowing Balance Balance ($ in millions) Maturities 6/30/2026 12/31/2025 U.S. dollar debt (weighted-average interest rate at June 30, 2026): (1) (2) 3.7% 2026 $ $ 5,800 3.3% 2027 4,119 4,119 4.8% 2028 2,318 2,319 3.7% 2029 4,256 3,757 3.2% 2030 2,382 2,355 4.5% 2031 1,000 500 4.6% 2032 2,700 2,700 4.7% 2033 1,250 750 4.9% 2034 1,000 1,000 5.2% 2035 900 900 5.0% 2036 1,000 8.0% 2038 83 83 4.5% 2039 2,745 2,745 2.9% 2040 650 650 4.0% 2042 1,107 1,107 5.3% 2044 1,000 1,000 7.0% 2045 27 27 4.7% 2046 650 650 4.3% 2049 3,000 3,000 3.0% 2050 750 750 4.2% 2052 1,400 1,400 5.1% 2053 650 650 5.3% 2054 1,400 1,400 5.7% 2055 1,000 1,000 5.8% 2056 750 7.1% 2096 316 316 $ 36,453 $ 38,979 Euro debt (weighted-average interest rate at June 30, 2026): (1) 2.3% 2027 $ 2,286 $ 2,349 1.2% 2028 2,914 2,114 1.5% 2029 1,143 1,174 1.7% 2030 2,000 2,055 2.8% 2031 4,000 2,936 0.7% 2032 1,829 1,879 3.2% 2033 1,257 1,292 2.4% 2034 2,286 1,174 3.8% 2035 1,143 1,174 3.5% 2037 1,029 1,057 3.9% 2038 857 1.2% 2040 971 998 4.0% 2043 1,143 1,174 3.8% 2045 857 881 $ 23,714 $ 20,258 Other currencies (weighted-average interest rate at June 30, 2026): (1) Pound sterling (4.9%) 2038 $ 995 $ 1,009 Japanese yen (1.2%) 20262028 781 811 Other (13 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"The following tables provide details of revenue by major products/service offerings and revenue by geography. Revenue by Major Products/Service Offerings Three Months Ended June 30, Six Months Ended June 30, ($ in millions) 2026 2025 2026 2025 Hybrid Cloud $ 1,998 $ 1,796 $ 3,903 $ 3,483 Automation 1,951 1,883 3,692 3,467 Data 1,782 1,499 3,256 2,736 Transaction Processing 2,030 2,208 3,963 4,037 Total Software $ 7,761 $ 7,387 $ 14,813 $ 13,722 Strategy and Technology 2,933 2,920 5,829 5,702 Intelligent Operations 2,394 2,395 4,770 4,680 Total Consulting $ 5,327 $ 5,314 $ 10,599 $ 10,382 Hybrid Infrastructure 2,570 2,866 4,678 4,512 Infrastructure Support 1,265 1,275 2,483 2,515 Total Infrastructure $ 3,835 $ 4,142 $ 7,161 $ 7,027 Financing (1) 186 166 406 357 Other (2) 52 (31) 100 30 Total revenue $ 17,162 $ 16,977 $ 33,079 $ 31,519 (1) Contains lease and loan financing arrangements which are not subject to the guidance on revenue from contracts with customers. (2) Includes reductions in revenue for estimated residual value less related unearned income on sales-type leases, which reflects the z17 launch in June 2025. Refer to note A, ""Significant Accounting Policies,"" in the company's 2025 Annual Report for additional information."

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Stock-Based Compensation: Stock-based compensation cost for stock awards and stock options is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations. Three Months Ended June 30, Six Months Ended June 30, ($ in millions) 2026 2025 2026 2025 Cost $ 73 $ 67 $ 149 $ 132 SG&A expense 228 244 497 461 R&D expense 198 130 358 249 Pre-tax stock-based compensation cost 498 441 1,004 842 Income tax benefits (146) (156) (353) (350) Net stock-based compensation cost $ 352 $ 285 $ 651 $ 492 Pre-tax stock-based compensation cost for the three months ended June 30, 2026 increased $58 million compared to the corresponding period in the prior year primarily due to an increase in restricted stock units ($79 million) due to the issuance and assumption of stock-based compensation awards in connection with recent acquisitions, offset by a decrease in performance share units ($23 million) due to adjustments related to attainment of targets. Pre-tax stock-based compensation cost for the six months ended June 30, 2026 increased $163 million compared to the corresponding period in the prior year primarily due to increases in restricted stock units ($131 million) and performance share units ($24 million). The increases are driven by the company's annual cycle for employees, adjustments related to targets for performan …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Intangible Assets Including Goodwill: Intangible Assets The following tables present the company's intangible asset balances by major asset class. At June 30, 2026 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount (1) Intangible asset class: Capitalized software $ 1,458 $ (482) $ 977 Client relationships 13,331 (6,202) 7,128 Completed technology 8,925 (4,556) 4,369 Patents/trademarks 2,139 (740) 1,399 Other (2) 139 (58) 81 Total $ 25,992 $ (12,037) $ 13,955 At December 31, 2025 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount (1) Intangible asset class: Capitalized software $ 1,388 $ (424) $ 964 Client relationships 11,261 (5,602) 5,659 Completed technology 7,399 (4,096) 3,304 Patents/trademarks 2,030 (665) 1,365 Other (2) 139 (40) 99 Total $ 22,218 $ (10,827) $ 11,391 (1) Amounts at June 30, 2026 and December 31, 2025 include a decrease in the net intangible asset balance of $34 million and an increase in the net intangible asset balance of $182 million, respectively, due to foreign currency translation. (2) Other intangibles are primarily acquired proprietary and non-proprietary technology licenses, data, business processes, methodologies and systems. The net carrying amount of intangible assets increased $2,564 million during the first six months of 2026, primarily due to additions of acquired intangibles from Confluent of $3,834 million in the first quarter of 2026 and additions of capitalized software, pa …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

Contingencies: As a company with a substantial employee population and with clients in more than 175 countries, IBM is involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business. The company is a leader in the information technology industry and, as such, has been and will continue to be subject to claims challenging its Intellectual Property (IP) rights and associated products and offerings, including claims of copyright and patent infringement and violations of trade secrets and other IP rights. In addition, the company enforces its own IP against infringement, through license negotiations, lawsuits or otherwise. Further, given the rapidly evolving external landscape of cybersecurity, AI, privacy and data protection laws, regulations and threat actors, the company and its clients have been and will continue to be subject to actions or proceedings in various jurisdictions. Also, as is typical for companies of IBMs scope and scale, the company is party to actions and proceedings in various jurisdictions involving a wide range of labor and employment issues (including matters related to contested employment decisions, country-specific labor and employment laws, and the companys pension, retirement and other benefit plans), as well as actions with respect to contracts, product liability, cybersecurity, data privacy, securities, foreign …

LegalMattersAndContingenciesTextBlock · excerpt; the full note is in the filing

New Standards to be Implemented Intangibles - Goodwill and Other - Internal-Use Software Standard/Description Issuance date : September 2025. This guidance requires internal-use software development cost capitalization to begin when both of the following occur: management has authorized and committed to funding the software project, and it is probable the project will be completed and the software will be used to perform its intended function. This guidance eliminates accounting considerations of software development stages. Effective Date and Adoption Considerations The guidance is effective for the company for annual and interim reporting periods beginning January 1, 2028. Early adoption is permitted. Effect on Financial Statements or Other Significant Matters The company is evaluating the impact of the guidance in the consolidated financial results. Disaggregation of Income Statement Expenses Standard/Description Issuance date: November 2024. This guidance requires a new tabular disclosure of certain types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) that are included within commonly presented expense captions on the income statement. The guidance also requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Additionally, the guidance requires the disclosure of the total amount of selling expenses and an entitys def …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Retirement-Related Benefits: The company offers defined benefit (DB) pension plans, defined contribution (DC) plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. Cost/(Income) of Retirement Plans The following table provides the components of the cost/(income) for the companys retirement-related benefit plans. ($ in millions) U.S. Plans Non-U.S. Plans For the three months ended June 30: 2026 2025 2026 2025 Service cost $ 86 $ 88 $ 46 $ 44 Interest cost (1) 180 187 288 267 Expected return on plan assets (1) (266) (268) (361) (369) Amortization of prior service costs/(credits) (1) 16 6 Recognized actuarial losses (1) 122 70 75 87 Curtailments and settlements (1) 3 5 Multi-employer plans 4 3 Other costs/(credits) (1) 9 10 Total net periodic pension (income)/cost of defined benefit plans $ 122 $ 77 $ 80 $ 52 Cost of defined contribution plans 16 17 109 103 Total defined benefit pension and defined contribution plans cost recognized in the Consolidated Income Statement $ 138 $ 93 $ 189 $ 155 ($ in millions) U.S. Plans Non-U.S. Plans For the six months ended June 30: 2026 2025 2026 2025 Service cost $ 173 $ 176 $ 89 $ 85 Interest cost (1) 359 374 579 518 Expected return on plan assets (1) (532) (536) (724) (715) Amortization of prior service costs/(credits) (1) 32 11 Recognized actuarial losses (1) 243 140 151 169 Curtailments and settlements (1) 4 7 Multi-employer plans 7 6 Other costs/(credits) (1) 20 18 Total net periodic pension ( …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

"Revenue Recognition: Disaggregation of Revenue The following tables provide details of revenue by major products/service offerings and revenue by geography. Revenue by Major Products/Service Offerings Three Months Ended June 30, Six Months Ended June 30, ($ in millions) 2026 2025 2026 2025 Hybrid Cloud $ 1,998 $ 1,796 $ 3,903 $ 3,483 Automation 1,951 1,883 3,692 3,467 Data 1,782 1,499 3,256 2,736 Transaction Processing 2,030 2,208 3,963 4,037 Total Software $ 7,761 $ 7,387 $ 14,813 $ 13,722 Strategy and Technology 2,933 2,920 5,829 5,702 Intelligent Operations 2,394 2,395 4,770 4,680 Total Consulting $ 5,327 $ 5,314 $ 10,599 $ 10,382 Hybrid Infrastructure 2,570 2,866 4,678 4,512 Infrastructure Support 1,265 1,275 2,483 2,515 Total Infrastructure $ 3,835 $ 4,142 $ 7,161 $ 7,027 Financing (1) 186 166 406 357 Other (2) 52 (31) 100 30 Total revenue $ 17,162 $ 16,977 $ 33,079 $ 31,519 (1) Contains lease and loan financing arrangements which are not subject to the guidance on revenue from contracts with customers. (2) Includes reductions in revenue for estimated residual value less related unearned income on sales-type leases, which reflects the z17 launch in June 2025. Refer to note A, ""Significant Accounting Policies,"" in the company's 2025 Annual Report for additional information. Revenue by Geography Three Months Ended June 30, Six Months Ended June 30, ($ in millions) 2026 2025 2026 2025 Americas $ 8,417 $ 8,462 $ 16,278 $ 15,668 Europe/Middle East/Africa 5,633 5,413 10,876 …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Segments: The following tables reflect the results of continuing operations of the companys segments consistent with the management and measurement system utilized within the company. Performance measurement is based on segment profit. The chief operating decision maker (CODM) considers budget-to-actual results of segment profit, both when evaluating the performance of and allocating resources to each of the segments as well as in developing certain compensation recommendations. The CODM reviews segment revenue, cost and profit information related to each segment, which is included in the tables below, but does not regularly review total assets by segment and therefore, such information is not presented. Management System Segment View ($ in millions) Software Consulting Infrastructure Financing Total Segments For the three months ended June 30, 2026: Revenue $ 7,761 $ 5,327 $ 3,835 $ 186 $ 17,110 Segment cost 1,350 3,789 1,596 107 6,841 Other expenses and (income) (1) 3,910 892 1,404 (29) 6,176 Segment profit $ 2,502 $ 647 $ 835 $ 108 $ 4,092 Revenue year-to-year change 5.1 % 0.2 % (7.4) % 12.2 % 0.6 % Segment profit year-to-year change 8.9 % 15.1 % (13.4) % (39.7) % 2.2 % Segment profit margin 32.2 % 12.1 % 21.8 % 58.0 % 23.9 % For the three months ended June 30, 2025: Revenue $ 7,387 $ 5,314 $ 4,142 $ 166 $ 17,009 Segment cost 1,190 3,854 1,593 90 6,727 Other expenses and (income) (1) 3,900 898 1,583 (103) 6,278 Segment profit $ 2,296 $ 562 $ 965 $ 179 $ 4,003 Segment prof …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Equity Activity: Reclassifications and Taxes Related to Items of Other Comprehensive Income ($ in millions) Before Tax Amount Tax (Expense)/ Benefit Net of Tax Amount For the three months ended June 30, 2026: Other comprehensive income/(loss): Foreign currency translation adjustments $ (9) $ (42) $ (51) Net unrealized gains/(losses) on available-for-sale securities $ 0 $ 0 $ 0 Unrealized gains/(losses) on cash flow hedges: Unrealized gains/(losses) arising during the period $ 119 $ (31) $ 87 Reclassification of (gains)/losses to: Cost of services 22 (5) 17 Cost of sales (8) 3 (6) Cost of financing 1 0 1 SG&A expense (4) 1 (3) Other (income) and expense 80 (20) 60 Interest expense 5 (1) 4 Total unrealized gains/(losses) on cash flow hedges $ 215 $ (54) $ 161 Retirement-related benefit plans: (1) Prior service costs/(credits) $ $ $ Net gains/(losses) arising during the period 0 0 Curtailments and settlements 3 (1) 2 Amortization of prior service costs/(credits) 9 (2) 7 Amortization of net (gains)/losses 197 (51) 145 Total retirement-related benefit plans $ 208 $ (54) $ 154 Other comprehensive income/(loss) $ 414 $ (150) $ 263 (1) These accumulated other comprehensive income (AOCI) components are included in the computation of net periodic pension cost. Refer to note 18, Retirement-Related Benefits, for additional information. Reclassifications and Taxes Related to Items of Other Comprehensive Income ($ in millions) Before Tax Amount Tax (Expense)/ Benefit Net of Tax Amount …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

Subsequent Events : On July 22, 2026, the company announced that the Board of Directors approved a quarterly dividend of $1.69 per common share. The dividend is payable September 10, 2026 to stockholders of record on August 10, 2026.

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