International Business Machines Corp. (IBM) reported second-quarter revenue of $17.16 billion on Wednesday, missing Wall Street's $17.26 billion estimate, and cut its 2026 constant-currency revenue growth outlook to 4%-5% from more than 5%. Management attributed the shortfall to delayed closures of dozens of large infrastructure deals rather than weaker customer demand. The company maintains that AI demand remains strong and continues to expect full-year free cash flow to increase by about $1 billion year over year.
IBM Reports Q2 Revenue Miss With Infrastructure Sales Decline
IBM reported second-quarter revenue of $17.16 billion, up 1% year-over-year but below the $17.26 billion consensus estimate, according to Fiscal.ai. The results reflected a 7% year-over-year decline in infrastructure revenue, flat consulting sales and 5% growth in software revenue.
Adjusted earnings came in at $2.93 per share, matching analysts' expectations, according to Fiscal.ai. Net income declined to $2.17 billion, or $2.30 per share, from $2.19 billion, or $2.36 per share, a year earlier.
Investors had already received an early look at the quarter after IBM previewed its second-quarter earnings last week, marking only the second earnings pre-announcement in the company's history following the 2008 financial crisis, according to Barron's.
IBM Reduces 2026 Revenue Growth Forecast
IBM trimmed its full-year 2026 revenue outlook, forecasting constant-currency growth of 4% to 5%, down from its earlier expectation of more than 5%. The company said it continues to expect free cash flow to increase by about $1 billion year over year for the full year.
Arvind Krishna, IBM chairman, president and chief executive officer, said, "We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio --- across software, infrastructure and consulting --- is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future."
Management Attributes Shortfall to Infrastructure Deal Delays
During the Q2 earnings conference call, IBM said delayed closures of "tens of large deals" accounted for most of the infrastructure revenue shortfall. The company added that about 80% of its annual software revenue is recurring and sees no evidence of customers moving away from its mainframe business. It added, "AI is driving incremental capacity growth and new workloads as clients look to run AI closer to their most sensitive data."
IBM Stocks Decline After-Hours Following Earnings Report
IBM shares fluctuated in after-hours trading, initially rising by around 3% before edging lower. At the time of writing, IBM stock was down about 0.13% after ending the regular session 2.25% lower. As of Wednesday's close, IBM shares have declined around 32% year-to-date.
Retail sentiment on Stocktwits for IBM was 'bullish,' unchanged in the past 24 hours, while message volume was 'high.'
FAQ
What caused IBM's Q2 revenue to miss estimates?
IBM's Q2 revenue of $17.16 billion missed the $17.26 billion estimate due to a 7% year-over-year decline in infrastructure revenue. Management said delayed closures of tens of large infrastructure deals accounted for most of the shortfall rather than weaker customer demand.
How did IBM change its 2026 revenue outlook?
IBM reduced its full-year 2026 constant-currency revenue growth forecast to 4%-5%, down from its previous expectation of more than 5%. The company continues to expect free cash flow to increase by about $1 billion year over year for the full year.
What was IBM's stock performance after the earnings report?
IBM shares fluctuated in after-hours trading, initially rising around 3% before turning negative. At the time of writing, IBM stock was down about 0.13% after ending the regular session 2.25% lower. As of Wednesday's close, IBM shares have declined around 32% year-to-date.
