IBM stock plunges as Q2 revenue misses estimates amid infrastructure slump

IBM shares experienced a historic decline on Tuesday, 14 July 2026, following the company’s decision to issue a preliminary report ahead of its scheduled second-quarter earnings release. The stock plunged more than 25 percent during the morning session, a drop that analysts and reports suggest positions the company for its worst single-day performance in history, surpassing the previous record decline observed on 19 October 1987.

IBM reports revenue and earnings miss for Q2

The technology company revealed that its second-quarter revenue is expected to reach approximately $17.2 billion. This figure represents a 1 percent increase compared to the previous year but fails to meet the consensus estimate of $17.86 billion held by market analysts. Similarly, IBM reported adjusted earnings per share of $2.93, falling short of the anticipated $3.02.

In a letter to investors, Chairman and CEO Arvind Krishna characterized the preliminary results as disappointing. The company attributed the shortfall to several factors, primarily involving performance issues within its mainframe business, internal execution challenges, and a shifting landscape of corporate spending.

Infrastructure and mainframe challenges

IBM’s infrastructure revenue saw an anticipated 7 percent decline, a downturn the company linked to the performance of its z17 mainframe program and the associated software stack, particularly in transaction processing. While the company had initially anticipated a low-single-digit decline for infrastructure revenue for the year, the actual results failed to meet those projections.

"What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases."

Arvind Krishna, Chairman and CEO, IBM

Krishna noted that the company did not foresee the intensity of this capital expenditure reprioritization. Furthermore, the CEO identified execution failures, stating, We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall. He added that the quarter was also marked by clients being preoccupied with industry-wide cybersecurity concerns.

AI performance versus legacy business

Despite the broader financial shortfall, IBM highlighted a continued expansion in artificial intelligence, reporting that cumulative AI bookings have surpassed $12 billion. The company maintains that its portfolio remains strong, pointing to 5 percent growth in software revenue, which included 11 percent sequential growth in Red Hat revenue. Distributed Infrastructure also reached a performance milestone, rising 37 percent with a backlog of approximately $500 million.

The results have drawn scrutiny from market analysts regarding the company's trajectory. Some experts, such as Citi analyst Fatima Boolani, suggested that the results could perpetuate 'AI-Loser' fears. Market observers have noted that while IBM continues to invest in long-term projects such as quantum computing and AI partnerships with entities like OpenAI, the transition from legacy business segments remains a vulnerability.

Next steps for financial reporting

IBM is scheduled to release its full second-quarter financial results on 22 July 2026. The company cautioned that the preliminary figures provided on 14 July could be subject to minor changes as final accounting for the period ending 30 June 2026 is completed. In the interim, the sharp decline in IBM’s stock price has pressured the wider technology sector, impacting the performance of other software and consulting firms.