en.Wedoany.com Reported - IBM reported preliminary second-quarter 2026 revenue of $17.2 billion, up 1% year-over-year, driven by strong growth at Red Hat, but IBM Z mainframe business and related software underperformed expectations, and distributed infrastructure sales failed to fully offset the decline. Software revenue grew 5%, consulting revenue was flat, and infrastructure revenue fell 7%. GAAP diluted earnings per share fell 2% to $2.27, while operating earnings per share rose 5% to $2.93.
IBM Chairman and CEO Arvind Krishna said the company underestimated the magnitude of changes in customer capital spending during the final weeks of June. Customers shifted spending toward servers, storage, and memory products to secure supply-constrained infrastructure ahead of expected price increases, a change that affected purchasing patterns for IBM Z systems and transaction processing software. Krishna also noted that cybersecurity concerns distracted customers, delaying procurement decisions. IBM acknowledged that its own execution shortcomings contributed to the gap, with several large transactions failing to close within the expected timeframe.
Despite the weak quarter, IBM achieved strong growth in several strategic business areas. Red Hat revenue growth accelerated to 11%, and recent acquisitions HashiCorp and Confluent contributed to software growth. Distributed infrastructure revenue grew 37%, driven by Power and storage demand, with a backlog of approximately $500 million at quarter-end. The z17 mainframe project progressed at nearly 130% of the comparable z16 project trajectory. IBM also highlighted its $5 billion Lightwell software security program and plans to invest over $10 billion in quantum computing over five years.
Key financial metrics: Revenue $17.2 billion, software revenue up 5%, Red Hat revenue up 11%, consulting revenue flat (up 1% at constant currency), infrastructure revenue down 7%, distributed infrastructure revenue up 37%, GAAP gross margin 57.7% (down 100 basis points), operating gross margin 59.4% (down 70 basis points), GAAP earnings per share $2.27 (down 2%), operating earnings per share $2.93 (up 5%), year-to-date operating cash flow $7.8 billion, year-to-date free cash flow $4.8 billion. The z17 project performed at nearly 130% of the comparable z16 project trajectory. IBM committed $5 billion to Lightwell and plans to invest over $10 billion in quantum computing over five years.
Krishna said: "These are not excuses, but realities. Our job is to help customers navigate uncertainty and find ways to grow their businesses regardless of the external environment."
