IBM topped Wall Street's profit and revenue targets for the third quarter and raised its full-year cash forecast, the tech giant said in results released Oct. 21 — only to watch its stock slide anyway as analysts picked apart how durable the growth really is.

Armonk, New York-based IBM posted revenue of $17.1 billion, up 5% from a year earlier (6% at constant currency), while operating earnings per share came in at $2.95, beating the $2.86 analysts had expected, according to the company's third-quarter earnings announcement. GAAP diluted earnings per share rose to $2.31 from $1.84 a year ago. Software, IBM's biggest and most profitable segment, grew 8% to $7.8 billion, with Red Hat's hybrid-cloud business up 11% and data products up 19%. Infrastructure revenue rose 4% even as mainframe sales (IBM Z) fell 20% in a down part of the product cycle, while consulting revenue was essentially flat.

Free cash flow for the quarter reached $3.0 billion, up $700 million from a year earlier, and IBM now expects full-year free cash flow to rise by more than $1 billion year over year — an upgrade from its prior outlook. The company held its full-year revenue growth guidance at 4% to 5% at constant currency and declared its regular quarterly dividend of $1.69 a share.

"Disciplined execution throughout the quarter drove accelerated revenue growth and strong free cash flow," said IBM chairman and chief executive Arvind Krishna, crediting clients that are "deploying Super Intelligence in ways that transform entire operating models."

The report landed in the thick of a bruising earnings season for Big Tech's AI spenders. Days earlier, Meta shares had slumped after the social-media giant posted negative free cash flow for the first time since going public, and chipmakers were down more than 15% for the month on fears that AI infrastructure spending is outrunning returns. IBM, by contrast, sells AI tools and consulting services to other companies rather than building its own costly data-center fleet — a model that let it post rising cash flow while rivals burned through theirs.

That didn't stop investors from selling. Shares fell roughly 3.7% to 5% in the session after the report, according to an analysis from Investing.com, which noted that consulting growth of only about 2% lagged software, and that roughly a quarter of the software segment's gains came from deals that had simply slipped out of the prior quarter rather than new demand — a pattern some analysts said raises questions about how sustainable the acceleration is heading into 2027.

IBM filed the results with the Securities and Exchange Commission the same day in a Form 8-K, formalizing the numbers for investors. The company's next scheduled catalyst is its fourth-quarter report in late January, but the stock's mixed reaction adds to a broader split on Wall Street this week between "AI infrastructure" plays facing margin scrutiny and "AI services" companies like IBM that investors are still trying to value. The debate continues against the backdrop of the Federal Reserve's two-day policy meeting, which wraps Wednesday, and a fresh wave of megacap earnings from Microsoft, Alphabet, Meta and Amazon due later this week.