IBM delivered disappointing second-quarter results on Wednesday and reduced its full-year revenue outlook, extending a difficult stretch for the technology company that has seen its shares fall 30% in 2026 even as the broader market has climbed.
The results came a week after IBM took the unusual step of preannouncing preliminary second-quarter figures, a rare move in the technology sector that sent the stock plummeting 25% in its sharpest single-day decline on record.
Net income for the quarter came in at $2.17 billion, or $2.30 per share, down from $2.19 billion, or $2.36 per share, in the year-earlier period. Revenue grew just 1% year over year, according to the company’s statement. The final figures matched the preliminary numbers IBM disclosed last week.
Mainframe Sales Collapse
The company’s struggles centered on its infrastructure business, where revenue fell 7% to $3.84 billion. Within that segment, sales of IBM’s Z mainframe computers plunged 42% as organizations rushed to purchase hardware ahead of expected price increases, creating a timing mismatch that left the current quarter depleted.
In a letter to investors last week, Chief Executive Arvind Krishna cited the worse-than-planned performance in mainframe and transaction processing software sales as the primary driver of the shortfall.
Lowered Revenue Guidance
Management now expects constant-currency revenue growth of 4% to 5% for the full year, down from the more than 5% outlook the company provided as recently as April. IBM maintained its projection for $1 billion in higher free cash flow for 2026 and said it aims to expand its full-year pre-tax margin by about 1 percentage point through productivity improvements.
The company’s software segment, which carries higher profit margins, delivered $7.76 billion in second-quarter revenue, up 5% from a year earlier. Consulting revenue remained flat at $5.33 billion.
AI and Productivity Push
Despite the financial headwinds, IBM highlighted progress on several strategic initiatives. The company signed a letter of intent during the quarter to build a U.S. quantum chip foundry, advancing its position in quantum computing infrastructure.
IBM also introduced Bob, an artificial intelligence coding tool that uses a mixture of generative models. The company said more than 80,000 employees have adopted the tool as part of a broader effort to boost productivity through AI.
According to Wednesday’s statement, IBM is “accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain.” The company said these efforts should help enhance margins and free cash flow while positioning IBM to capture growth opportunities.
IBM shares have sharply underperformed the S&P 500 index this year, falling 30% through Wednesday’s close while the broader index has gained about 10%. Executives planned to discuss the results in greater detail on a conference call with analysts Wednesday evening.
Source: www.cnbc.com — https://www.cnbc.com/2026/07/22/ibm-q2-earnings-report-2026.html
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