IBM, the world's largest technology services company, posted fourth-quarter earnings of $2.26 a share before special items, surpassing a Thomson Financial consensus estimate of $2.19 a share.
IBM earned $2.11 a share in the fourth quarter of 2005.
IBM profits reached $3.541 billion in the most recent quarter, up from $3.187 billion in the same period last year. Revenue rose 7.5% to $26.257 billion.
IBM said it signed services contracts in the quarter totaling $17.8 billion, marking a year-over-year increase of 55%.
The company has been expanding in software, its most profitable business, and last year bought 11 software providers including Internet Security Systems and FileNet.