International Business Machines Corporation

Welcome, and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Olympia McNerney, IBM's Global Head of Investor Relations. Olympia, you may begin.

Thank you. I'd like to welcome you to IBM's first quarter 2026 earnings presentation. I'm Olympia McNerney, and I'm here today with Arvind Krishna, IBM's Chairman, President, and Chief Executive Officer, and Jim Cavanaugh, IBM's Senior Vice President and Chief Financial Officer. We'll post today's prepared remarks and a replay of today's webcast on the IBM Investor website within a couple hours. The earnings presentation is already available. To provide additional information to our investors, our presentation includes certain non-GAAP measures. All of our references to revenue and signings growth are at constant currency. We provided reconciliation charts for these and other non-GAAP financial measures at the end of the presentation, which is posted to our investor website. Finally, some comments made in this presentation may be considered forward-looking under the Private Securities Litigation Reform Act of 1995. These statements involve factors that could cause our actual results to differ materially. Additional information about these factors is included in the company's SEC filings. So with that, I'll turn the call over to Arvind.

Thank you for joining us today. Let me start with our first quarter results and then provide context of what we are seeing across the business. IBM is off to a strong start to 2026. Revenue in the first quarter grew 6%. and combined with strong margin expansion, drove 13% growth in free cash flow. These results reflect the durability of our portfolio, the mission critical nature of the work we do for clients, and the continued execution of our strategy. Let me first touch on the macro. While we are operating in a dynamic environment, Middle East developments didn't impact us in the first quarter. Uncertainties remain, but our diversity across businesses, geographies, industries, and large enterprise clients position us well. Conversations we are having with clients remain consistent. Enterprises are investing in capabilities that increase resiliency, productivity, and accelerate growth. They are modernizing core systems. They are scaling AI. and they're making deliberate choices about where workloads should run and who controls the infrastructure underneath them. These are structural priorities, and they align directly with IBM's strengths. This quarter's performance reinforces the strategic choices we have made over the last several years to advance IBM as a software-led hybrid cloud and AI platform company. Software revenue grew 8%, with data and Red Hat growing double digits. Infrastructure grew 12% with another record Z quarter up 48%. We also had strong performance in distributed infrastructure as generative AI increases demand for our storage offerings. Consulting grew 1% with momentum in enterprise data and business application transformations as clients modernize to deploy AI securely and at scale. The durability of our portfolio is a defining feature of IBM today. Let me spend a few minutes on AI. Enterprises are still figuring out where to deploy this technology and where competitive advantage truly sits. Every major technology wave has followed a pattern. Value begins with infrastructure, moves to enabling platforms, and ultimately concentrates in the workflows where businesses operate. Right now, the spotlight is on foundation models. Enterprises are building portfolios, frontier models for some workloads, smaller models running on-premise for others, and open source models where control and flexibility matter the most. Enterprises will want to retain control of their proprietary data. AI will run everywhere, across public cloud, private and sovereign clouds, and on-premise. The core challenge is making all of this work together. This includes orchestrating across models, agents and workflows, governing enterprise data, and securing these systems at scale. And that is exactly where IBM operates. We are building the platform that lets enterprises put AI to work on their terms, wherever it runs, whichever models they choose, and under governance they control. Our portfolio is built around world-class security, support, and integration for an enterprise environment. Red Hat provides a common open platform that lets enterprises run applications in AI consistently across any infrastructure. More AI adoption means more demand for open, flexible infrastructure. In automation, the logic is similar. Agents multiply applications, integrations, and execution paths. Managing that sprawl requires a control plane to provision infrastructure, integrate applications, secure environments, and manage cost. This is what our end-to-end automation portfolio provides. In an AI-driven world, security risks are rising. IBM Concert identifies vulnerabilities proactively and automates remediation, helping enterprises maintain resilience at scale. Our data business is seeing similar AI tailwinds. AI is only as good as the data it can access. And increasingly, that data is not static. It is generated continuously across transactions, applications, and interactions. To deliver real-time AI outcomes, data must be available in motion, governed, and delivered securely to models and agents wherever they are running. Confluent, which we closed this past quarter, solves that directly. It streams live, governed data to models and agents across the hybrid environment. and the orchestration layer ties it together. In a multi-model world, clients need to route between models, manage agent workflows, and maintain governance. That is what Watson X orchestrate and our Watson X platform deliver. We have also created AI editions of critical software products like DB2, Cognos, and MQ. These embed agentic AI that can reason, act, and automate at scale, while preserving IBM-grade security and trust. Infrastructure remains a critical differentiator as AI moves into the core of enterprise operations. IBM Z delivers the lowest unit cost architecture at scale for workloads that require end-to-end encryption, continuous availability, and ultra-high throughput. Clients rely on our Z platform to process billions of transactions reliably with six to eight nines of availability. They run AI inferencing directly in line with those transactions. Our Spire accelerator lets clients run AI on 100% of their transaction volume without moving data off-platform, allowing them to embed AI directly into their transaction flows. Financial services clients are using this for real-time fraud detection, saving tens of millions of dollars. At the same time, AI-assisted modernization, including code understanding, refactoring, and API integration, makes it easier to evolve applications without compromising the guarantees the platform provides. Our Watson X assistance for Z were made available over two years ago. They help clients preserve the architectural strengths that deliver resilience, security, and scalability while making the platform more productive. Clients who have deployed Watson X Code Assistant for Z are growing MIPS capacity three times faster than those who have not. In consulting, AI is both a growth driver and a productivity engine. As agents take on more work, delivery becomes faster, more software-driven, and more scalable. IBM is leaning into this shift through our consulting advantage platform, and unique integrated value sitting side by side with software. This helps clients operationalize AI while improving our own efficiency. Demand continues to accelerate as clients move beyond experimentation and focus on transforming applications, data, and workflows to embed AI into core operation. All of this allows us to drive value for clients. ServiceNow is leveraging Watson X automated data quality and observability to deliver AI-ready data and code generation to refresh legacy applications to modern application runtimes, including ServiceNow. Visa continues to work with IBM on ongoing software and data modernization efforts, supporting the scale, resiliency, and performance of VisaNet. With Nestle, we're using NVIDIA-accelerated WatsonX.data to embed AI directly into core order-to-cash operations, enabling faster real-time insights across Nestlé's global supply chain. This highlights how quickly we can bring research to bear for commercial value. Nestlé was ideal for this proof of concept because of its strong digital backbone. In infrastructure, clients such as NatWest and RBC are modernizing their mainframe environments using AI and automation capabilities, including Watson X Assistant and Watson X Code Assistant for Z, to improve resiliency, security, and developer productivity. We continue to accelerate organic innovation. IBM Bob, our AI-based software development system, is now generally available. Our entire developer workforce is using Bob, with average productivity gains of 45%. Bob automates the full software lifecycle from legacy modernization to security using specialized agents and multi-model optimization. It drives developer productivity and predictable costs. We also introduced Sovereign Core, software that lets organizations run AI workloads under their own operational authority within a defined jurisdiction and auditable controls. We see sovereignty becoming a bigger factor in where and how workloads run. Every enterprise and every nation is waking up to the same reality. They need AI and cloud infrastructure they control, infrastructure no one can turn off or tamper with because of geopolitics. During the quarter, we also announced strategic collaborations with NVIDIA, expanding our work across GPU-native analytics. In addition, we announced a strategic collaboration with Arm to expand how AI workloads run across IBM infrastructure. By enabling the Arm software ecosystem within mission-critical environments like IBM Z, clients can scale AI closer to their data while preserving the security and resilience they require. These partnerships reflect our approach, open, flexible, and on the infrastructure clients choose. We continue to make progress in quantum and remain on track to deliver the first large-scale fault-tolerant quantum computer by 2029. Here are some signposts of progress. In March, researchers used IBM quantum hardware to simulate a 300-atom system with the Cleveland Clinic, demonstrating that quantum computers can serve as reliable tools for pharmaceutical discovery. Another team accurately simulated real magnetic materials. Magnetism is central to new forms of energy and electrification. These are significant demonstrations to date that quantum computers can serve as reliable tools for scientific discovery. We also released a new blueprint for quantum centric supercomputing that outlines the architecture for integrating quantum and classical systems at scale. We strongly believe that our partners will achieve the first examples of quantum advantage this year leveraging IBM hardware. In closing, we are executing on our strategy of accelerating revenue growth and delivering higher profitability. Given our strong start to the year, we remain confident in our ability to sustain revenue growth of 5% plus and grow free cash flow by about $1 billion this year. With that, let me hand it over to Jim to go through the financials.