IBM lowered its 2026 full-year revenue growth outlook.

On July 22, CNBC reported that in its second-quarter earnings release IBM projected revenue growth of 4 to 5 percent this year on a constant-currency basis. That was a step back from the more than 5 percent target it presented in April.

The downgrade follows IBM's unusual move last week to release preliminary second-quarter results first and issue an earnings warning. At the time, CEO Arvind Krishna (아르빈드 크리슈나) said in a letter to investors that sales of Z mainframes and transaction-processing software were weaker than planned. He said results fell short of expectations even though companies rushed to buy hardware before price increases. IBM shares plunged 25 percent in a single day at the time, marking the biggest one-day drop on record, and the year-to-date decline reached 30 percent at the July 22 close. The S&P 500 index rose about 10 percent over the same period.

Second-quarter results fell short of market expectations in terms of profitability. IBM's quarterly revenue rose 1 percent from a year earlier. Net profit fell to $2.17 billion, or $2.30 per share, from $2.19 billion, or $2.36 per share, a year earlier. The revenue and adjusted earnings per share figures released that day were the same as those in the preliminary announcement a week earlier.

By business segment, software supported results. Revenue in the high-margin software unit rose 5 percent to $7.76 billion. Consulting revenue was flat at $5.33 billion. Infrastructure revenue fell 7 percent to $3.84 billion, and within that, Z mainframe revenue tumbled 42 percent. The figures show that weakness in infrastructure, and particularly in the mainframe business, underlies the downgrade to the full-year outlook.

IBM maintained its cash flow outlook. IBM reaffirmed its earlier forecast that free cash flow would rise by $1 billion this year. While it lowered its revenue growth expectations, it is seen as aiming to defend cash generation through cost cuts and operational efficiency. IBM said in a statement, "We are boosting productivity by expanding software development using artificial intelligence (AI), and we are pursuing efficiency in our sales and marketing organisation and optimising the supply chain." It added, "These efforts help improve margins and free cash flow and strengthen our capabilities to capture important growth opportunities."

IBM also said it signed a letter of intent during the quarter to build a quantum chip foundry in the United States. It also unveiled an AI coding tool called Bob that combines generative models, and more than 80,000 employees have already adopted it. Still, the focus of the market in these results was the slowdown in its core infrastructure business and the retreat from its annual growth target rather than an expansion of new businesses.

Analysts also weighed on sentiment after cutting estimates following last week's preliminary announcement. It is rare for tech companies to provide preliminary figures ahead of an official earnings release, and IBM effectively showed in advance that it was in a situation where it would be difficult to maintain its existing guidance. Even so, the stock rose 4 percent in after-hours trading that day. The figures were not much different from those disclosed a week earlier, and the earnings shock had already been largely reflected in the share price, which appeared to provide short-term relief.

IBM management is scheduled to hold a conference call for analysts from 5 p.m. Eastern time on Thursday to explain the results.

Key issues ahead include whether the infrastructure unit can recover and how much software growth can cushion overall results. In particular, IBM's second-half performance is expected to hinge on whether the sharp drop in Z mainframe revenue proves to be only a temporary adjustment and whether other businesses can fill the gap within the 4 to 5 percent growth target.