IBM Cuts 2026 Sales Outlook as AI Spending Squeezes Legacy Businesses

IBM has long relied on mainframes, transaction-processing software and consulting to run critical systems for banks, airlines and governments. That franchise is being tested as corporate technology budgets shift toward scarce servers, storage and memory for AI data centers. Generative AI coding tools are also lowering the cost of building applications in-house, intensifying investor concern that established enterprise software could face both budget pressure and longer-term substitution risk.

On July 22, 2026, IBM cut its full-year constant-currency revenue growth forecast to 4%-5% from more than 5%. Revenue for the quarter ended June 30 rose 1% to $17.16 billion, below the $17.58 billion analyst estimate, while IBM Z sales plunged 42% and pulled infrastructure revenue down 7% to $3.84 billion. Software revenue rose 5% to $7.76 billion but missed expectations. IBM said it would accelerate productivity measures using AI, automation and supply-chain optimization while maintaining its target for full-year free cash flow to increase by about $1 billion.