The preliminary report, released in advance of its planned earnings report set for Thursday, sent its shares up 8 percent on premarket trading.
IBM said the weaker dollar helped to push revenue up 10 percent.
The company reported quarterly profit from continuing operations of $2.80 per share on revenue of $28.9 billion, easily beating Wall Street's consensus estimates of $2.60 per share on sales of $27.82 billion, according to a Thomson Financial poll.
International Business Machines Corp. said revenue grew 10 percent from the year-ago period, with 6 points of that growth related to the weaker dollar.
"The broad scope of IBM's global business - led by strong operational performance in Asia, Europe and emerging countries - drove these outstanding results," said Samuel J. Palmisano, IBM chairman, president and chief executive.
For fiscal 2007, IBM reported earnings rose 18 percent to $7.18 per share, including a 5-cent gain on the sale of its printing systems division in the second quarter, on sales of $98.8 billion, representing 8 percent growth year-over-year.
Analysts had predicted full-year profit of $6.97 per share on revenue of $97.73 billion.
Its shares rose $7.85 to $105.52 in premarket trading.
IBM's cash balance at the end of 2007 was more than $16 billion.
The company will report full quarterly and full-year results for 2007 on Thursday.