IBM cuts 2026 revenue growth forecast as customers shift spend to AI infrastructure

IBM cut its annual revenue growth forecast, Reuters reported, days after warning that corporate spending was shifting toward AI-focused data-center gear at the expense of its software and mainframe computers. The Armonk, New York-based company also missed profit and revenue expectations for the second quarter ended June 30. IBM now expects 2026 revenue growth between 4% and 5%, down from previous expectations of more than 5% growth. The midpoint of the forecast is below analysts' average estimate of a 4.8% rise to $70.77 billion in revenue, according to LSEG data cited by Reuters. Second-quarter revenue rose 1% to $17.16 billion, missing estimates of $17.58 billion. Adjusted profit was $2.93 per share, missing an average estimate of $2.97. Net profit was $2.17 billion. Revenue from IBM's Z mainframe slumped 42% in the quarter, dragging infrastructure revenue down 7% to $3.84 billion. Finance chief James Kavanaugh told Reuters the mainframe stack of hardware and transaction processing software impacted growth by over five points, more than the one or two points expected, while saying IBM sees no evidence of clients moving off mainframes and expects significant outperformance in the program through the second half. Software revenue rose 5% to $7.76 billion but missed an average estimate of $7.88 billion. CEO Arvind Krishna said on the earnings call that a majority of what did not happen in the second quarter was large capex deals at large clients, and that about one-third of those deals had closed in the current third quarter. He said a lot of the demand is deferred, not destroyed. Shares dipped marginally in extended trading after a 2% rise earlier, Reuters reported.