On Wednesday, IBM reported adjusted earnings per share of $2.93, slightly below the expected $2.97, and revenue of $17.16 billion, which also fell short of the $17.58 billion consensus. The company's revenue grew only 1% year over year, and net income decreased to $2.17 billion from $2.19 billion a year ago.
IBM's management has revised its revenue growth forecast for 2026 down to 4% to 5% in constant currency, a reduction from the previous expectation of over 5%. This adjustment follows a significant drop in sales of Z mainframe computers and transaction processing software, as noted by CEO Arvind Krishna, who indicated that organizations were purchasing hardware in anticipation of price increases.
Following a preliminary earnings warning, analysts adjusted their estimates downward, leading to a historic 25% drop in IBM's stock price. Despite these challenges, IBM's high-margin software segment reported a 5% increase in revenue to $7.76 billion, while consulting revenue remained flat at $5.33 billion. However, infrastructure revenue declined by 7%, with Z mainframe revenue plummeting 42%.
IBM is also pursuing growth opportunities, including plans for a U.S. quantum chip foundry and the introduction of the Bob AI coding tool, which has seen adoption by over 80,000 employees. The company's efforts to enhance productivity through AI and optimize its operations are aimed at improving margins and free cash flow.
IBM's stock has decreased by 30% in 2026, contrasting with a 10% increase in the S&P 500 index. Executives will further discuss these results in an upcoming conference call