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Arvind Krishna’s Letter to IBM Investors

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ARMONK, N.Y., July 14, 2026 /PRNewswire/ —

IBM Investors –

This morning we are releasing selected preliminary second-quarter 2026 financial results. We are still working to close our financial reporting for the quarter and our final results could be slightly different.

For the second quarter:

Revenue:

Revenue of $17.2 billion, up 1 percentSoftware revenue up 5 percentConsulting revenue flat, up 1 percent at constant currencyInfrastructure revenue down 7 percent

Profit:

Gross Profit Margin: GAAP: 57.7 percent, down 100 basis points; Operating (Non-GAAP): 59.4 percent, down 70 basis pointsPre-Tax Income Margin: GAAP: 14.4 percent, down 90 basis points; Operating (Non-GAAP): 19.2 percent, up 30 basis points

Cash Flow:

Year to date, net cash from operating activities of $7.8 billion; free cash flow of $4.8 billion

EPS:

Diluted Earnings Per Share: GAAP: $2.27, down 2 percent; Operating (Non-GAAP): $2.93, up 5 percent

I want to spend some time explaining what we experienced in the quarter that led to the Software and Infrastructure performance shortfall you see above.

When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter. Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter. What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.

These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.

These are not excuses, but they are realities. Our job is to help our clients through uncertainty, to find paths forward to grow their businesses no matter what is happening in the external environment.

While our second-quarter results are disappointing, our performance in many areas showed strength, reinforcing the conviction we have in our portfolio and strategy.

Within Software, Red Hat revenue growth accelerated sequentially to 11 percentRecent acquisitions including both HashiCorp and Confluent delivered strong performanceWith clients prioritizing infrastructure investments, Distributed Infrastructure had its best performance in reported history, up 37 percent with strong growth in Power and Storage, and a backlog of approximately $500 million exiting the quarterDespite challenges this quarter, z17 remains at nearly 130 percent program-to-program, well ahead of z16 which was our strongest program on record, with clients representing 85% of installed MIPs maintaining or growing capacityContinued growth in Consulting signings led by strong GenAI contributionProductivity initiatives contributed to continued operating (non-GAAP) PTI Margin expansion in the quarter

Importantly, we continue to innovate at speed and scale. After the introduction of Mythos, our teams across IBM and Red Hat quickly mobilized to take advantage of an unprecedented opportunity, launching Lightwell. Lightwell is a $5 billion commitment backed by new frontier AI capabilities and a global force of more than 20,000 engineers creating a trusted enterprise clearinghouse to address open source software vulnerabilities. Early adopters include organizations like Bank of America, BNY, Citi, Goldman Sachs, JPMorganChase, Mastercard, Morgan Stanley, Royal Bank of Canada, State Street, Visa, Wells Fargo and more. General availability of Lightwell was announced on July 8.

Finally, quantum computing is no longer decades away, it is upon us, and we are investing aggressively. Recently, with the U.S. Department of Commerce, we announced a letter of intent to build Anderon, the world’s first pure-play quantum wafer foundry supported by $1 billion in CHIPS incentives provided by the DoC and a $1 billion cash contribution by IBM. Shortly after that, we disclosed plans to invest more than $10 billion in quantum over the next five years, spanning R&D, capex, manufacturing scaling, M&A and ecosystem expansion. We remain on track to deliver the first large-scale fault-tolerant quantum computer by 2029.

While performance in the quarter was below our expectations, we have conviction in the strength of our portfolio and the strategic transformation of our business. To remedy challenges this quarter, we are undertaking new initiatives and accelerating others, all to improve our results going forward. We will hold our regularly scheduled conference call with you all on July 22, 2026, at 5PM ET to go into deeper detail and discuss our full-year expectations.

Arvind Krishna
Chairman, President and Chief Executive Officer, IBM
(NYSE: IBM)

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this letter may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company’s ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI, including the company’s increased  AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.

Any forward-looking statement in this letter speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Letter

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this letter the following non-GAAP information, which management believes provides useful information to investors:

adjusting for currency (i.e., at constant currency);presenting operating (non-GAAP) earnings per share amounts and related income statement items;free cash flow;net cash from operating activities excluding IBM Financing receivables.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this letter and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled for Wednesday, July 22, 2026 at 5:00 p.m. ET. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q26. Presentation charts will be available shortly before the Webcast.

Selected Financial Information Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

Contact:

IBM
Sarah Meron, 347-891-1770
sarah.meron@ibm.com 

Tim Davidson, 914-844-7847
tfdavids@us.ibm.com 

 

INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; $ in millions except per share amounts)

Three Months Ended June 30, 2026

Continuing Operations

GAAP

Acquisition-

Related

Adjustments (1)

Retirement-

Related

Adjustments (2)

Operating

(Non-GAAP)

Gross profit

$         9,907

$              287

$                —

$        10,194

Gross profit margin

57.7

%

1.7

pts

pts

59.4

%

Pre-tax income from continuing operations

2,479

716

96

3,290

Pre-tax income margin from continuing operations

14.4

%

4.2

pts

0.6

pts

19.2

%

Diluted earnings per share: continuing operations

$           2.27

$             0.58

$             0.08

$           2.93

Three Months Ended June 30, 2025

Continuing Operations

GAAP

Acquisition-

Related

Adjustments (1)

Retirement-

Related

Adjustments (2)

Operating

(Non-GAAP)

Gross profit

$         9,977

$              225

$                —

$        10,202

Gross profit margin

58.8

%

1.3

pts

pts

60.1

%

Pre-tax income from continuing operations

2,597

575

25

3,197

Pre-tax income margin from continuing operations

15.3

%

3.4

pts

0.1

pts

18.8

%

Diluted earnings per share: continuing operations

$           2.31

$             0.47

$             0.02

$           2.80

(1)

Includes amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as financing costs.

(2)

Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.

 

INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION
(Unaudited)

($ in millions)

Six Months Ended
June 30, 2026

Net cash provided by operating activities per GAAP

$                7,766

Less: change in IBM Financing receivables

2,264

Net cash from operating activities excl. IBM Financing receivables

5,503

Capital expenditures, net

(743)

Free cash flow

$                4,760

 

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Ramp Launches Ramp for Construction to Help Companies Catch Job Overruns Before Month-End

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New capabilities automate job coding for field crews and give finance real-time visibility and control across every project

NEW YORK, July 14, 2026 /PRNewswire/ — Ramp today launched Ramp for Construction, a suite of construction-specific capabilities across Ramp’s financial operations platform to help general contractors, builders, and subcontractors control spend at the job level, protect margins, and catch overruns before they happen.

For many construction firms, overruns surface at month-end, after card charges, invoices, approvals, and job codes have finally been reconciled—and after the margin is already gone. The problem is fragmentation: cards in one place, AP in another, approvals over email, and job coding in spreadsheets. In a nearly $2.2 trillion U.S. industry built around tight job-level margins, disconnected systems make it harder for contractors to see and control spend in real time.

Ramp for Construction connects the field and back office at the point of spend. Field crews get a simpler way to make purchases, capture receipts, and confirm job details without sorting through irrelevant codes or chasing paperwork weeks later. Finance teams get cleaner project data from the start, managed centrally and synced with the systems they already use.

“I drop the invoice in and Ramp pulls all the amounts, retainage included, and matches it against what’s committed on the PO,” said David Anderson, Accountant at Dick Anderson Construction. “It updates in real time as I enter invoices and change orders, so when it’s time to release, I just check the balance in Ramp and release it, no separate report needed.”

Ramp for Construction adds construction-specific capabilities across Ramp’s cards, expense, and accounts payable platform:

Less admin for field crews: Ramp AI pre-fills the job, phase, and cost code based on the field worker and expense, so crews simply one-click review and confirm. Mobile and SMS receipt capture keeps submissions quick.Project-based approvals: Route expenses and bills to the project manager accountable for each job, giving construction firms a first line of defense to review spend, catch issues, and maintain control before costs are approved.Real-time project visibility: Ramp tracks card, bill, and purchase order activity to show actuals vs budget as spend happens on each project.Automated retainage tracking: Ramp tracks retainage from purchase order through release, helping general contractors enforce holdbacks, reduce manual spreadsheet work, and protect against financial risk.Compliant subcontractor payments: Ramp checks that lien waivers, W-9s, and certificates of insurance meet company policy before payment, helping teams reduce risk without adding manual review to every payout.

“Construction firms should have the visibility they need to manage project profitability in real time,” said Geoff Charles, Chief Product Officer at Ramp. “Every card swipe and invoice should hit the right job, cost code, and budget the moment money moves. Ramp for Construction gives finance teams the controls to enforce compliance, protect margins, and act with confidence as projects evolve.”

Ramp for Construction is already helping firms improve operations. More than 70% of receipts are matched within 24 hours, field teams submit 2.7x more transactions with accurate cost coding at the time of submission, and teams save more than 15 hours each month through automated retainage tracking and compliance document reviews.

Ramp for Construction supports Viewpoint Vista, Viewpoint Spectrum, Sage 100 Contractor, Sage 300 CRE, Sage Intacct, Sage Intacct Construction, CMiC, Acumatica, NetSuite, and QuickBooks Online.

Ramp for Construction is available now. Learn more at ramp.com/construction.

About Ramp

Ramp is how companies save time and money on every dollar they spend. It’s the smart financial infrastructure behind every card swipe, invoice, and reimbursement – streamlining approvals, processing payments, and closing the books automatically. More than 70,000 organizations, from family farms and space startups to the Fortune 100, have saved over $12 billion and 27 million hours with Ramp. For the median customer, that translates to 5% savings on expenses and 16% revenue growth in their first year. Founded in 2019, Ramp powers over $200 billion in purchases annually. Learn more at www.ramp.com.

* Ramp does not include bank transfers or non-monetized payments when calculating Total Purchase Volume.

press@ramp.com

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Eagle Hill Retention Index: Employee Retention Outlook Softens as Workers Reassess Their Options

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Declining Compensation Sentiment and Renewed Confidence in Job Opportunities Signal Growing Attrition Risk—Especially Among Millennials

ARLINGTON, Va., July 14, 2026 /PRNewswire/ — The latest Eagle Hill Consulting Employee Retention Index declined 1.3 points in the second quarter of 2026 to 104.2, marking its lowest level in the past year and signaling that U.S. workers will be less likely to remain in their current roles over the next six months. While retention remains relatively strong by historical standards, the latest data suggest employers may be entering a period of increased workforce mobility.

The decline comes as employees grow less satisfied with their compensation while simultaneously growing more optimistic about opportunities in the external job market. Notably, these shifts occurred even as employees’ confidence in organizations and satisfaction with workplace culture improved.

“Today’s workforce is sending employers a nuanced message,” said Melissa Jezior, president and chief executive officer of Eagle Hill Consulting. “Employees generally feel good about their organizations and workplace culture, but many are questioning whether their compensation and long-term growth opportunities are keeping pace with the market. When workers begin to believe they have better options elsewhere, retention risks increase, even inside organizations with strong cultures.”

The findings come as the broader labor market sends mixed signals. The latest Job Openings and Labor Turnover Survey (JOLTS) showed job openings holding steady at 7.6 million, exceeding expectations and suggesting opportunities remain available for workers considering a move. At the same time, the June jobs report showed hiring slowed considerably, highlighting a labor market that is cooling but continues to offer opportunities for skilled talent.

“Employers shouldn’t interpret a slower hiring market as a reason to become complacent,” Jezior added. “Workers are evaluating the entire employee experience, not just whether they have a job, but whether they see a future with their employer. Organizations that invest in career development, leadership, culture, and meaningful rewards will be in the strongest position to retain critical talent as mobility begins to increase.”

Key Retention Index Indicators

Compensation Indicator: Declined 5.6 points, representing the only indicator to weaken this quarter.Job Market Opportunity Indicator: Increased 1.9 points, reflecting growing optimism about external job opportunities.Organizational Confidence Indicator: Increased 0.9 points, rebounding after two consecutive quarters of decline.Culture Indicator: Increased 0.3 points, continuing its steady upward trend for a fourth consecutive quarter.

Millennials Emerge as the Biggest Retention Risk
Although overall retention outlook declined modestly, the largest shift occurred among Millennials. Millennials experienced a 6.1-point decline in the Retention Index, signaling that they pose an attrition risk. They were the only generation to report declines across organizational confidence, compensation, and culture while simultaneously expressing greater confidence in outside job opportunities.

As Millennials increasingly occupy management, leadership, and specialized professional roles, this shift could have outsized implications for organizations.

“Millennials now represent the backbone of leadership pipelines across many organizations,” said Jezior. “When this generation begins questioning whether to stay, employers risk losing institutional knowledge, leadership continuity, and future executives. The findings underscore why retaining high-potential talent must be a core business and workforce planning priority, not just an HR initiative.”

Generational Gap Begins to Narrow
Unlike previous quarters, retention outlooks across generations became more closely aligned.

Gen Z reported a modest decline.Millennials experienced the sharpest drop.Gen X became more likely to stay.Baby Boomers also showed improved retention sentiment.

Compensation Increasingly Drives Retention Decisions
The Compensation Indicator experienced its sharpest decline in recent quarters, suggesting employees are placing greater emphasis on total rewards, future earning potential, and advancement opportunities.

Combined with improving perceptions of external job opportunities, the findings indicate workers may increasingly compare what they receive today against what they believe they could earn elsewhere.

The Eagle Hill Employee Retention Index is a first-of-a-kind market indicator that tracks worker sentiment across four proven drivers of retention: organizational confidence, culture, compensation, and job market opportunity.

The Organizational Confidence Indicator measures how confident employees are in their organization’s future and leadership.The Culture Indicator looks at employee sentiment about their workplace culture, connections, and whether they feel valued and recognized.The Compensation Indicator measures how employees view their compensation, benefits, and ability to grow their compensation at their organization.The Job Market Opportunity Indicator measures how employees perceive external prospects for employment and job security in the near term.

Each month, the Eagle Hill Consulting Employee Retention Index measure shifts in workforce retention based upon ongoing employee opinion surveys on factors related to worker intentions to change jobs. As the Employee Retention Index increases, it signals an increase in retention in the next six months. As the Employee Retention Index decreases, it signals to employers that workers are more likely to leave their jobs, and organizations can expect more turnover in the next six months.

The Eagle Hill Consulting Employee Retention Index is based on a monthly omnibus survey conducted by IPSOS of a nationally representative sample of U.S. adults employed full- or part-time. Quarterly indices and reports are issued based on a minimum of 1,200 aggregated responses per quarter. Respondents are polled on a range of workforce topics including organizational confidence, culture, compensation, and job market opportunity.
The survey commenced in December 2022, and the most recent data was collected from April and June 2026.

Eagle Hill Consulting LLC is an award-winning business that provides unconventional management consulting services in the areas of Organizational Performance, Business Intelligence, Technology Enablement, Talent, and Change Management. The company’s expertise in delivering innovative solutions to unique challenges spans across Fortune 500 companies, government agencies, and global nonprofits. Eagle Hill has offices in the Washington, D.C. metropolitan area, Boston, MA, and Seattle, WA. More information is available at www.eaglehillconsulting.com.

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SOURCE Eagle Hill Consulting LLC

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New Flywheel Report Shows How Brands Can Turn Fragmentation into a Competitive Advantage

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The Big Shift outlines how a Total Commerce approach can connect media, retail, trade and consumer engagement as shopping journeys become increasingly complex.

BALTIMORE, July 14, 2026 /PRNewswire/ — Flywheel, a leader in commerce and technology solutions and part of the Omnicom (NYSE: OMC) Integrated Media offering, today released The Big Shift: From Managing to Mastering Fragmentation, a new white paper examining how AI-powered search, social commerce, retail media and organizational silos are reshaping the way brands drive growth.

While 80% of consumers (OM Research, Connected Commerce 2024) now take a non-linear path to purchase, many brands still manage media, retail, trade, and shopper marketing through separate teams, budgets, and performance metrics. According to Flywheel, that disconnect leads to wasted media investment, missed sales opportunities, unmeasured promotional impact, and reduced organizational agility.

The report argues that brands must adopt a Total Commerce approach, a business model that unifies consumer discovery, retail activation, media investment, trade planning, and measurement into one operating system focused on business outcomes rather than channel performance.

“The way consumers discover and buy products has fundamentally changed,” said Mike Feldman, SVP Commerce at Flywheel. “A shopper might discover a product through a creator, research it through an AI assistant, purchase it through a retailer marketplace and pick it up in-store, all within a few hours. The brands winning today are not treating those moments as separate channels. They are organizing around one connected consumer journey.”

The report notes that TikTok generated $33.1 billion in gross merchandise volume in Q1 2026, surpassing eBay and demonstrating how quickly discovery and purchase are converging on a single platform.

The report identifies three forces accelerating the fragmentation challenge:

Consumer discovery has fundamentally changed. Social platforms have become primary discovery engines, with 73% of Gen Z and 67% of Millennials (Salsify, 2025) citing social media as their main source for learning about new products. Nearly half of social media users have also used influencers in their purchase journey.AI is becoming a new discovery channel. Thirty-six percent of consumers, including 45% of Gen Z and 51% of Millennials (OM Research – GEO Update April 2026) say they have shifted most of their searches from traditional search engines to generative AI platforms.Retailers have become media companies. Retailers now operate advertising businesses, premium content platforms and closed-loop measurement capabilities that increasingly connect media exposure to purchase behavior.

The report arrives as marketers grapple with many of the same trends that dominated conversations at this year’s Cannes Lions Festival of Creativity, including creator commerce, retail media, and AI-powered discovery. Against that backdrop, The Big Shift emphasizes the continued importance of physical retail, arguing that while discovery increasingly happens across creators, AI, retail media and connected TV, the shelf remains one of the most critical moments in the consumer journey.

“The physical shelf is still one of the most important moments in commerce, but it is no longer where the consumer journey begins,” said Phil Camarota, Chief Creative Officer at Flywheel and President of the Cannes Lions Creative Commerce Jury. “By the time a shopper reaches a store or product page, they have already been influenced by creators, retail media, reviews, AI recommendations and countless other touchpoints. The brands that succeed are creating one connected experience, across all those moments.”

The report also highlights Flywheel client Danone’s “Become a Home’Rista” campaign as an example of Total Commerce in action. Built around the insight that many consumers believed barista-quality coffee required professional expertise, the program connected influencer content, retail media, digital shelf activation and in-store experiences across multiple retailers. The campaign generated 641 million impressions and multi-brand halo sales across Danone’s portfolio.

Ariel Dalton, Head of Strategic Insights, Planning & Connected Commerce at Danone shared: “We uncovered what we call the ‘barista gap’ and built a campaign that inspires consumers to recreate and elevate the coffeehouse experience at home. The success of this campaign demonstrated the power of pairing a compelling consumer insight with the strength of Danone’s portfolio, to deliver a daily ritual that feels both elevated and unique to the consumer. What began as a pilot in 2025 has evolved into one of our flagship programs, scaling across multiple retail activation nationwide.

“Fragmentation leaves brands with a simple choice: manage it or master it,” Feldman said. “Brands that own consumer journeys across channels, orchestrate with retailers around shared outcomes and align internally around one set of goals will create competitive advantage. The brands that master fragmentation will define the next era of commerce.” 

About Flywheel:

Flywheel, a leader in commerce and technology solutions and part of the Omnicom (NYSE: OMC) Integrated Media offering, provides best-in-class service that combines tailored expertise with advanced software solutions to help clients drive incremental sales, market share, profitability, and measurable commerce growth.

A leader across major marketplace platforms, Flywheel combines global scale and influence with a customized, client-centric approach designed to deliver impactful business outcomes. Client success remains at the center of the company’s mission.

With operations across the Americas, Europe, APAC, and China, Flywheel is widely recognized for the scale of its retail media capabilities, while delivering value across the entire commerce ecosystem. The company helps brands navigate the evolving commerce landscape through integrated solutions built to accelerate growth and performance.

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SOURCE Flywheel Digital

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