IBM lowered its full-year 2026 guidance and reported quarterly results that disappointed Wall Street forecasts, even as the company had provided an advance earnings warning days earlier. The technology vendor’s stock rose 4% in extended trading following the announcement.
The company posted second-quarter revenue growth of 1% on a year-over-year basis. Net income reached $2.17 billion, equivalent to $2.30 per share, marking a decline from $2.19 billion, or $2.36 per share, in the prior-year period. Management reduced its outlook for constant-currency revenue expansion to 4% to 5% for the full year, retreating from guidance of over 5% that had been in place as recently as April.
The earnings disappointment stemmed partly from unforeseen challenges in the company’s infrastructure division. Mainframe computer revenue contracted 42%, while the overall infrastructure segment declined 7% to $3.84 billion. Management attributed the weakness to customer behavior, explaining that organizations had accelerated hardware purchases in anticipation of upcoming price increases. The software segment, however, demonstrated relative strength, generating $7.76 billion in revenue with 5% growth, though the consulting division remained flat at $5.33 billion.
Chief Executive Arvind Krishna had signaled the challenges in a letter to investors released the prior week after the company issued a preliminary earnings alert. That announcement triggered a sharp market reaction, with IBM shares declining 25% in their worst single trading day on record. Through the current point in 2026, the stock has fallen 30%, significantly underperforming the S&P 500 index, which advanced roughly 10%.
Looking ahead, the company reiterated its expectation of achieving $1 billion in incremental free cash flow during 2026. IBM also announced progress on strategic initiatives, including a letter of intent to construct a domestic quantum chip foundry and the introduction of an artificial intelligence coding assistant called Bob that has already achieved adoption among over 80,000 employees.
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