Key facts
- IBM lowered its 2026 revenue growth forecast to 4%-5% from over 5%.
- The company missed second-quarter profit and revenue expectations.
- IBM's Z mainframe revenue fell 42% in the second quarter.
- Software revenue increased 5% but fell short of analyst estimates.
- Total second-quarter revenue rose 1% to $17.16 billion, missing expectations.
IBM has revised its annual revenue growth forecast for 2026 downwards to a range of 4% to 5%, a decrease from its prior expectation of over 5%. This adjustment follows a significant warning to Wall Street that corporate spending is increasingly prioritizing AI-focused data center hardware, impacting sales of IBM's software and mainframe computers. The company also reported second-quarter results that fell short of profit and revenue expectations.
CEO Arvind Krishna acknowledged that IBM "faltered" in adapting to these shifts, leading to "numerous large deals" slipping. This situation contributed to a substantial drop in IBM's stock price. While software revenue saw a modest 5% increase to $7.76 billion, it did not meet analyst estimates. The company's infrastructure revenue, heavily impacted by a 42% slump in its Z mainframe business, fell 7% to $3.84 billion.
Despite the short-term challenges, IBM's finance chief James Kavanaugh stated that there is "no evidence of clients moving off a mainframe" and expects the mainframe business to perform well in the latter half of the year. Overall, IBM's second-quarter revenue grew 1% to $17.16 billion, missing estimates, with adjusted earnings per share of $2.93 also falling short of the $2.97 average analyst expectation.