IBM $IBM lowered its full-year revenue forecast on Wednesday after posting second-quarter results that fell short of analyst expectations, capping a difficult stretch for the technology company following a profit warning issued the week before.
The company now expects constant-currency revenue growth of 4% to 5% for 2026, down from a prior forecast of over 5%
NurPhoto / Getty Images
IBM $IBM lowered its full-year revenue forecast on Wednesday after posting second-quarter results that fell short of analyst expectations, capping a difficult stretch for the technology company following a profit warning issued the week before.
The company said it has revised its 2026 constant-currency revenue growth target to a range of 4% to 5%, retreating from the more than 5% it had previously projected. IBM maintained its forecast for free cash flow to increase by about $1 billion year over year.
Second-quarter revenue came in at $17.16 billion, up 1% from a year earlier. Adjusted earnings per share were $2.93. Analysts had expected revenue of $17.58 billion and adjusted earnings of $2.97 per share, according to CNBC.
IBM's software segment brought in $7.76 billion for the quarter, a 5% year-over-year gain. Consulting posted $5.33 billion, essentially unchanged from a year ago. Infrastructure slid 7% to $3.84 billion, with IBM Z mainframe revenue accounting for much of the damage by dropping 42%.
IBM said it is targeting a roughly 1-percentage-point expansion in its full-year pre-tax margin, driven by productivity gains that include deploying AI to accelerate software development and streamline its supply chain.
IBM Chairman, President and Chief Executive Officer Arvind Krishna, pointed to late-quarter revenue headwinds while expressing confidence in the company's positioning. "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," Krishna said in a statement.
IBM Senior Vice President and Chief Financial Officer James Kavanaugh said the company remained focused on financial discipline. "In a quarter like this, it is critical that our financial and operational discipline remains strong and that we continue to invest for growth while returning value to shareholders through our dividend," Kavanaugh said in a statement.
The revenue and earnings figures IBM reported Wednesday matched what the company had already disclosed in its preliminary warning the prior week. In a letter to investors accompanying that warning, Krishna pointed to disappointing Z mainframe and transaction processing software sales, explaining that customers had moved up hardware purchases in anticipation of coming price increases, according to CNBC. Shares tumbled 25% when the warning was issued, a one-day drop that represented the steepest in the company's history.
IBM said its board approved a quarterly dividend of $1.69 per share, payable September 10, 2026, continuing a streak of consecutive quarterly dividends dating to 1916.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.