IBM Lowers 2026 Outlook Amid Shift to AI Infrastructure
Synopsis
The technology company expects slower revenue growth as corporate IT budgets increasingly favour AI data-centre investments.
Key Highlights
- IBM reduced its 2026 revenue growth forecast, to 4%–5%.
- Its second-quarter revenue and profit did not meet expectations.
- Spending by customers on data centre infrastructure was driven by an increase in budgets for AI workloads, IBM said.
IBM lowered its full-year revenue growth outlook after mentioning that customers have redirected spending towards data centre infrastructure focused on artificial intelligence, which hit demand for its software and mainframe computers.
The performance was also below the expectations of analysts for revenue and profit in the second quarter ended June 30.
Revenue Forecast Lowered
The change means IBM anticipates revenue growth of 4% in 2026, above its prior forecast of over 5%.
IBM CEO Arvind Krishna said in Q2 that large capital deals and large client deals were delayed. Around one-third of those deals had now been completed in Q3, he added. Krishna said, Most of the demand is deferred and not destroyed.
Mainframe Business Weighs on Results
The infrastructure division generated US$3.84 billion in revenue, a 7% decline over the year, as IBM continued to feel the full effects of its 42% plunge in Z mainframe business.
Finance chief James Kavanaugh said there were no signs of customers abandoning mainframes, and the impact of IBM’s growth was more than expected.
Quarterly Results Miss Estimates
Software revenue increased by 5% to US$7.76 billion, compared to analysts’ expectations for US$7.88 billion in the period. Sales for the second quarter rose 1% to US$17.16 billion, below a forecast of US$17.58 billion.
IBM’s earnings in the period totalled US$2.17 billion, lower than last year. Adjusted earnings were US$2.93 per share, missing analysts’ estimate of US$2.97 a share.
Source: Reuters
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