“While we are absorbing incremental dilution given the early closing of Confluent, actions we are taking to accelerate our cost synergies enable us to stay on track to expand operating pretax margins by about 1 point this year.”

In context

“e quality of our backlog and momentum in GenAI with backlog penetration at about 30%, continue to support an acceleration in revenue growth to low to mid-single digits for the year. We are off to a great start with z17. And 4 quarters into z17's launch, we prudently continue to expect infrastructure revenue to be down low single digits for the year, representing about a 0.5 point impact to IBM. We remain confident this will be our strongest cycle given the AI innovation value we are delivering to clients. The momentum in our productivity flywheel is fueling margin expansion, while enabling investment in innovation. Last quarter, we disclosed that we anticipated absorbing about $600 million of dilution from Confluent in 2026, driven largely by stock-based compensation and interest expense. While we are absorbing incremental dilution given the early closing of Confluent, actions we are taking to accelerate our cost synergies enable us to stay on track to expand operating pretax margins by about 1 point this year. Our operating tax rate for the year should be in the mid-teens and the timing of discrete items can cause the rate to vary within the year. For free cash flow, we continue to expect to grow about $1 billion for the full year, driven primarily by growth in adjusted EBITDA. The headwinds I discussed heading into the year of higher cash taxes, higher CapEx and higher net interest expense remain the same. Looking to the second quarter, we expect our constant currency revenue growth rate to be similar to the full year. And for operating pretax margin, we expect about 50 basis points of expansion as software mix and productivity are offset by dilution from the early closing of Confluent. Our second quarter operating tax rate should be in the mid-teens. AI is fundamentally reshaping our clients'”