IBM’s $11.6 Billion Confluent Deal Closes as Earnings Beat Meets Stock Selloff

IBM delivered a first-quarter earnings beat that checked every box — revenue above estimates, record free cash flow, and a dividend hike — yet investors sent the stock sliding nearly six percent. The disconnect highlights a market demanding more than solid operational performance from the century-old technology giant.

The company posted revenue of $15.92 billion for the three months ended March 2026, a currency-adjusted increase of six percent. Adjusted earnings per share came in at $1.91, comfortably ahead of analyst forecasts. Free cash flow hit $2.2 billion, the highest first-quarter level in a decade, fueled by ongoing efficiency programs and strong core business momentum.

Mainframe Momentum and Software Strength

IBM’s infrastructure division emerged as a standout performer, driven by surging demand for the new z17 mainframe model. The company’s software unit also delivered double-digit revenue growth, with the recently completed $11.6 billion acquisition of Confluent already bolstering the data business. The March closing of that deal adds streaming-data capabilities that complement IBM’s existing portfolio.

Management sees generative artificial intelligence as an accelerant for the mainframe business rather than a threat. Chief Financial Officer James Kavanaugh noted that IBM’s own AI tools are driving faster system utilization as customers modernize their existing mainframe environments.

Should investors sell immediately? Or is it worth buying IBM?

The Cloud Over the Stock

Despite the strong numbers, shares fell to around €200, extending the year-to-date decline to roughly 20 percent. The trigger: IBM left its full-year guidance unchanged. The company continues to expect currency-adjusted revenue growth of more than five percent, a forecast CEO Arvind Krishna described as appropriately cautious given geopolitical uncertainties.

Investor anxiety also stems from reports that AI models such as Anthropic’s Claude can efficiently modernize the aging COBOL programming language, potentially threatening lucrative maintenance contracts for IBM’s mainframe systems. Krishna pushed back against that narrative, emphasizing that the company’s own AI tools are complementing, not cannibalizing, its legacy business.

Dividend Streak Continues

As a signal of financial health, the board approved a quarterly dividend increase to $1.69 per share, marking the 31st consecutive year of higher payouts. The payment is scheduled for June 10, 2026. The consulting business, however, showed more modest growth, with analysts pointing to AI’s disruptive effect on traditional consulting models as a potential headwind.

Technically, the stock now trades roughly 15 percent below its 200-day moving average. The coming quarter will test whether management’s cautious guidance proves too conservative — or whether the market’s skepticism was warranted all along.