IBM lowered its 2026 forecast on Wednesday and reported second-quarter profits below analyst expectations, even after issuing an earnings warning last week. The technology vendor cited worse-than-planned performance in Z mainframe computer sales and transaction processing software as organizations rushed to buy hardware ahead of expected price increases. The rare earnings warning in the technology sector triggered a 25% single-day stock decline last week, marking IBM's sharpest drop on record, though shares rose 4% in extended trading following the full quarterly results release.
IBM Reports Q2 Revenue of $17.16 Billion
IBM reported second-quarter revenue of $17.16 billion, missing the LSEG consensus estimate of $17.58 billion. Revenue grew 1% year over year in the quarter. Adjusted earnings per share came in at $2.93, below the expected $2.97. Net income totaled $2.17 billion, or $2.30 per share, compared to $2.19 billion, or $2.36 per share, a year ago. The adjusted earnings figure excludes acquisition-related adjustments.
Software Segment Grows 5% While Infrastructure Declines 7%
IBM's high-margin software segment generated $7.76 billion in second-quarter revenue, up 5%. Consulting revenue remained flat at $5.33 billion. The infrastructure segment produced $3.84 billion in revenue, declining 7%, with Z mainframe revenue falling 42%. CEO Arvind Krishna attributed the mainframe weakness to organizations rushing to purchase hardware ahead of expected price increases.
IBM Revises 2026 Revenue Growth Forecast to 4-5%
Management called for 4% to 5% constant-currency revenue growth for 2026. As recently as April, IBM had projected over 5% growth at constant currency. The company reiterated expectations for $1 billion in higher free cash flow for the year. The revenue and adjusted earnings per share figures disclosed on Wednesday aligned with preliminary results released a week ago.
IBM Stock Down 30% Year-to-Date in 2026
As of Wednesday's close, IBM shares declined 30% in 2026, while the S&P 500 index rose about 10%. The stock dropped 25% following the preliminary earnings announcement last week, marking its sharpest single-day decline on record. Shares rose 4% in extended trading after the full quarterly results release. Analysts cut their estimates after IBM announced preliminary second-quarter results.
IBM Announces Quantum Chip Foundry and Bob AI Tool
During the quarter, IBM signed a letter of intent to build a U.S. quantum chip foundry. The company also introduced the Bob artificial intelligence coding tool that relies on a mixture of generative models, with adoption from over 80,000 employees. IBM stated it is accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain.
FAQ
What did IBM report for Q2 2026 revenue?
IBM reported second-quarter revenue of $17.16 billion, missing analyst expectations of $17.58 billion. Revenue grew 1% year over year, with adjusted earnings per share of $2.93 compared to the expected $2.97.
Why did IBM lower its 2026 forecast?
IBM lowered its 2026 constant-currency revenue growth forecast from over 5% to 4-5% due to worse-than-planned performance in Z mainframe computer sales and transaction processing software. CEO Arvind Krishna cited organizations rushing to buy hardware ahead of expected price increases as a contributing factor.
How did IBM's stock perform after the earnings announcement?
IBM shares dropped 25% following the preliminary earnings announcement last week, marking the company's sharpest single-day decline on record. Shares rose 4% in extended trading after the full quarterly results release on Wednesday. Year-to-date in 2026, IBM stock is down 30%.
