IBM reported revenue growth of just 1% versus 4% expectations, with software organic growth flat and infrastructure down 7%, leading to an EPS miss of $2.93 versus the $3.01 estimate. Management pre-announced the shortfall and cut full-year revenue guidance to 4-5% growth, citing a 9% drop in transactional software revenue as clients redirected spending toward hardware like mainframes and GPUs amid AI demand, even as the 80% recurring software base delivered 8% ARR growth and 30 basis points of margin expansion. Free cash flow reached $4.8 billion, but the guidance cut highlights structural lumpiness, with IBM emphasizing its watsonx Orchestrate AI strategy to offset cyclical hardware priorities.

Company: International Business Machines Corporation (IBM) — Q2 FY2026

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