IBM reduced its full-year outlook and disclosed second-quarter results that fell short of analyst projections, despite having issued a preliminary earnings warning the previous week. The company now targets revenue growth of 4% to 5% in constant currency for 2026, a reduction from its earlier forecast of over 5% growth in the same measure.
Net income for the quarter reached $2.17 billion, or $2.30 per share, compared to $2.19 billion, or $2.36 per share, in the prior year. Revenue expanded 1% year over year during the period. The figures disclosed aligned with preliminary results the company had released approximately one week prior, after which analysts adjusted their estimates downward.
Chief Executive Arvind Krishna attributed the shortfall to weaker-than-anticipated performance in the Z mainframe computer and transaction processing software businesses, noting that customers had accelerated hardware purchases in anticipation of price increases. The infrastructure segment, which includes mainframe systems, experienced a 7% revenue decline, with Z mainframe revenue dropping 42%. By contrast, the high-margin software segment generated $7.76 billion in revenue, reflecting a 5% increase, while consulting revenue remained flat at $5.33 billion.
Management reiterated expectations for $1 billion in additional free cash flow for the year and stated its intention to widen the full-year pre-tax margin by approximately 1 percentage point through enhanced productivity initiatives. The company announced progress on several strategic initiatives, including a signed letter of intent to establish a U.S. quantum chip foundry and the introduction of the Bob artificial intelligence coding tool, which had been adopted by over 80,000 employees. IBM’s shares had declined 30% year to date, compared to the S&P 500 index, which had advanced roughly 10% over the same period.
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