International Business Machines Corp. Lowers Revenue Forecast as Mainframe Sales Plummet 42%

International Business Machines Corp. lowered its 2026 annual revenue growth forecast to between 4% and 5%, down from previous expectations of over 5%. The company missed profit and revenue expectations for the second quarter ended June 30, reporting revenue of $17.16 billion and a net profit of $2.17 billion.

This downturn was primarily driven by a 42% slump in Z mainframe revenue. Infrastructure revenue fell 7% to $3.84 billion and software revenue of $7.76 billion also missed estimates. CEO Arvind Krishna attributed the decline to customers shifting budgets toward AI-focused data-center hardware and PCs, where price increases of 15% to 30% occurred during the AI build-out boom. Krishna acknowledged that the company "faltered" in adapting, causing several large deals to slip into the third quarter.

The financial results triggered a 25% one-day drop in share price, the worst single-day decline in company history. To mitigate these losses, International Business Machines Corp. plans to accelerate cost-saving initiatives to generate an additional $1 billion in free cash flow this year. Despite the volatility, executives maintain that demand is deferred rather than destroyed, with one-third of the missed deals already closing in the third quarter.