IBM Cuts 2026 Revenue Outlook as AI Infrastructure Spending Squeezes Mainframes

IBM’s hybrid-cloud strategy has increasingly centered on Red Hat, watsonx and automation software, yet its Z mainframes and related transaction-processing products remain a critical profit engine for banks, airlines and other large enterprises. That model came under pressure in late June as customers redirected capital budgets toward scarce servers, storage and memory for AI data centers ahead of expected price increases, delaying large IBM hardware and software contracts and raising concerns that AI infrastructure is crowding out broader IT spending.

IBM on July 22 lowered its 2026 constant-currency revenue growth forecast to 4% to 5% from more than 5%. Second-quarter revenue rose 1% to $17.16 billion, below the $17.58 billion analyst estimate, while adjusted earnings of $2.93 a share also missed expectations. Software sales gained 5% to $7.76 billion, but infrastructure revenue fell 7% to $3.84 billion as IBM Z sales plunged 42%. CEO Arvind Krishna said much of the demand was deferred rather than lost, with about one-third of delayed deals already closing in the third quarter.