IBM’s latest earnings report revealed a miss against analyst expectations, even after the company had previously issued an earnings warning. The tech giant also lowered its full-year growth forecast, citing weaker-than-expected performance in its Z mainframe and transaction processing software segments.

Despite these challenges, IBM continues to invest in future technologies, including a planned U.S. quantum chip foundry and the AI coding tool ‘Bob’. The company aims to boost productivity and margins through AI integration and operational optimizations.

IBM Misses Earnings Expectations Despite Lowered Forecast, Stock Dips

Date: July 16, 2026

NEW YORK – International Business Machines (IBM) has once again fallen short of analyst expectations, delivering weaker-than-projected earnings and reducing its full-year growth forecast. This news comes even after the tech giant issued an earnings warning last week, signaling potential headwinds. IBM stated its intention to improve its full-year pre-tax margin by approximately 1 percentage point through enhanced productivity measures.

Key Financials vs. LSEG Consensus:

Adjusted Earnings Per Share (EPS): $2.93 vs. $2.97 expected
Revenue: $17.16 billion vs. $17.58 billion expected

IBM reported a modest 1% year-over-year revenue increase for the quarter. However, net income saw a slight decrease to $2.17 billion, or $2.30 per share, down from $2.19 billion, or $2.36 per share, in the same period last year. The adjusted earnings figures exclude certain acquisition-related adjustments.

Revised Growth Outlook and Contributing Factors:

Management has now projected revenue growth between 4% and 5% in constant currency for the full year 2026. This represents a downward revision from the previous outlook of over 5% growth, as recently as April. The company did reiterate its expectation for a $1 billion increase in free cash flow for the year.

The downward revision followed IBM's preliminary second-quarter results announcement, which led analysts to lower their estimates. CEO Arvind Krishna attributed the weaker performance in part to less-than-anticipated sales of Z mainframe computers and transaction processing software. He noted that many organizations accelerated their hardware purchases ahead of anticipated price increases.

The stock experienced a significant downturn, dropping 25% and marking its steepest single-day decline on record. As of Wednesday's market close, IBM shares had declined 30% year-to-date in 2026, contrasting sharply with the S&P 500's approximate 10% gain during the same period.

Segment Performance:

Software: Revenue reached $7.76 billion, marking a 5% increase.
Consulting: Revenue remained flat at $5.33 billion.
Infrastructure: Revenue declined 7% to $3.84 billion, with Z mainframe revenue specifically falling 42%.

Recent Developments:

Despite the financial challenges, IBM announced a letter of intent to construct a U.S. quantum chip foundry during the quarter. The company also introduced 'Bob,' an artificial intelligence coding tool powered by a blend of generative models, which has seen adoption by over 80,000 employees. IBM highlighted its ongoing efforts to enhance productivity through AI-leveraged software development, more effective sales and marketing, and supply chain optimization, aiming to boost margins, free cash flow, and capture growth opportunities.

Watch: Melius' Ben Reitzes discusses the future outlook for IBM.