IBM cuts yearly revenue growth forecast as customers prioritize AI infrastructure spending
IBM•IBM lowers its revenue outlook
IBM now expects 2026 revenue growth of 4% to 5%, down from its prior expectation 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 data compiled by LSEG.
The company also missed profit and revenue expectations for the second quarter ended June 30, but executives sought to reassure shareholders that customers prioritized spending on AI in the quarter but were not looking to move away from mainframes in the longer term.
Wall Street reaction and AI spending concerns
CEO Arvind Krishna said last week IBM had "faltered" in adapting and "numerous large deals" had slipped, sending the company's shares down 25%, its steepest one-day fall in more than a century.
The forecast spotlights how the scramble for AI hardware has stoked investor fears that companies rushing to secure scarce servers, chips and networking gear could be cutting back on spending on the wider software sector.
Mainframe weakness weighed on quarterly results
Revenue from IBM's Z mainframe slumped 42% in the second quarter, dragging infrastructure revenue down 7% to $3.84 billion.
"That mainframe stack of hardware and transaction processing software impacted IBM's growth by over five points in the quarter," IBM finance chief James Kavanaugh told Reuters. "We were only expecting about a point or two of an impact."
