IBM trims forecast, but shares rebound after a brutal warning
IBM lowered its 2026 revenue growth view, yet shares rose after hours as investors appeared to brace for worse.
By Sal Moretti · Money Reporter
2 min read
IBM cut its full-year revenue outlook on Wednesday, but Wall Street did not hit the panic button twice.
Shares of International Business Machines rose 3% in after-hours trading following the company’s official second-quarter earnings report, according to MarketWatch. The bounce came less than a week after a bruising profit warning sent the stock down 25% in one session, the largest one-day drop on record for IBM, MarketWatch reported.
The company said it now expects 2026 revenue to grow 4% to 5% on a constant-currency basis. Its earlier forecast called for growth of more than 5%.
That is a cut, but it may not have been the disaster some investors feared. Evercore analyst Amit Daryanani wrote before the release that he expected IBM to lower its revenue guidance to a low-to-mid single-digit range, according to MarketWatch.
AI spending squeezes software
IBM’s warning last week centered on a sharp budget squeeze among customers. According to MarketWatch, the company said clients had been spending heavily on artificial-intelligence hardware, leaving less cash available for software purchases.
IBM also cited recent pressure in its mainframe business when it issued that warning, MarketWatch reported. The trouble landed at an awkward time for a company working to recast itself for the AI era.
The second-quarter numbers showed the strain. IBM reported revenue of $17.2 billion, up 1% from a year earlier, but below the $17.48 billion analysts had expected before the company’s preliminary update last week, according to MarketWatch.
Adjusted earnings came in at $2.93 a share. That was 5% higher than a year earlier, but also just short of the $2.95 analysts had been modeling before last week’s warning, MarketWatch reported.
Cash flow stays on track
IBM did leave one key target unchanged. The company said it still expects annual free cash flow to rise by about $1 billion compared with 2025.
Chief Financial Officer James Kavanaugh said in IBM’s release that the company faced revenue pressure late in the second quarter, while continuing to focus on productivity, its portfolio and free cash flow. He also said IBM intended to keep investing for growth while returning money to shareholders through its dividend.
IBM spent $1.6 billion on dividends during the second quarter, according to the company’s report cited by MarketWatch.
The after-hours rise does not erase a rough year for the stock. IBM shares are down about 30% so far in 2026, according to MarketWatch.
For investors, Wednesday’s report delivered a mixed package: weaker revenue guidance, a miss versus earlier analyst expectations, a maintained cash-flow target and a stock reaction that suggested the market had braced for an even harsher update.
This story draws on original reporting from MarketWatch.