IBM lowers full-year forecast after earnings warning
IBM is now looking to improve productivity with artificial intelligence, including with a new coding tool called Bob.
IBM is now looking to improve productivity with artificial intelligence, including with a new coding tool called Bob.
IBM on Wednesday lowered its 2026 forecast and delivered thinner quarterly profits than analysts had projected, even after the technology vendor issued an earnings warning last week. Shares rose 1% in extended trading, as IBM said it aims to widen its full-year pre-tax margin by about 1 percentage point through higher productivity.
IBM's revenue grew 1% year over year in the quarter, according to a statement . Net income of $2.17 billion, or $2.30 per share, decreased from $2.19 billion, or $2.36 per share, a year ago. Adjusted earnings exclude acquisition-related adjustments.
Management called for 4% to 5% in constant-currency revenue growth for 2026. As recently as April , IBM had been looking for over 5% at constant currency. The company reiterated expectations for $1 billion in higher free cash flow for the year.
Analysts cut their estimates after IBM announced preliminary second-quarter results, a rare move in technology. In a letter to investors, CEO Arvind Krishna cited worse-than-planned performance in sales of Z mainframe computers and transaction processing software as organizations rushed to buy hardware ahead of expected price increases. The stock dropped 25%, marking its sharpest single-day decline on record.
The revenue and adjusted earnings per share figures IBM disclosed on Wednesday were in line with the figures released a week ago.
As of Wednesday's close, IBM shares have come down 30% so far in 2026, while the S&P 500 index is up about 10%.
IBM said its high-margin software segment produced $7.76 billion in second-quarter revenue, up 5%. Consulting revenue, at $5.33 billion, was flat. Revenue from infrastructure, at $3.84 billion, declined 7%, with Z mainframe revenue falling 42%.
During the quarter, IBM said it signed a letter of intent to build a U.S. quantum chip foundry . It also introduced the Bob artificial intelligence coding tool that relies on a mixture of generative models, with adoption from over 80,000 employees.
"IBM is accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain, the company said in Wednesday's statement. "These efforts help enhance margin and free cash flow, and strengthen the company's ability to capture significant growth opportunities."
Executives will discuss the results on a conference call with analysts starting at 5 p.m. ET.
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