IBM cuts 2026 revenue growth outlook amid AI hardware shift

IBM lowered its 2026 revenue growth forecast to 4‑5% at constant currency, down from a prior expectation of above 5%. The revision follows a weaker second‑quarter where revenue rose only 1% to $17.16 billion, missing analyst expectations, and adjusted earnings fell to $2.93 per share.

The company's infrastructure segment declined 7% to $3.84 billion, with mainframe Z sales dropping 42%, while software revenue grew 5% to $7.76 billion but still lagged forecasts. IBM said customers are shifting investment budgets toward AI‑related servers, storage and components, accelerating some purchases due to limited equipment availability and anticipated price hikes. This reallocation delayed several large software and mainframe contracts, which the CEO, Arvind Krishna, expects to close in the third quarter.

The earnings release triggered a roughly 25% one‑day drop in IBM’s share price, the steepest single‑day decline in over a century, heightening market concerns that rapid AI spending could temporarily curb spending on traditional enterprise software and systems.