NEW YORK, July 15, 2026, 06:04 EDT. IBM NYSE:IBM shares slumped after filings showed a roughly 24% decline in mainframe and support revenue tied to its latest SEC report.
- IBM said second-quarter revenue was up 1% to $17.2 billion, but revenue from infrastructure dropped 7%.
- IBM Z and Infrastructure Support revenue dropped around 24% combined, based on a reconstruction of IBM’s segment numbers. That was even with distributed infrastructure revenue gaining 37%.
International Business Machines Corporation NYSE:IBM shares dropped 25.2% Tuesday after early results came up short of estimates. A breakdown of IBM’s segment numbers shows a bigger issue: IBM Z mainframes and Infrastructure Support may have fallen about 24% from a year ago. Distributed infrastructure rose 37%, but that wasn’t enough to keep the hardware unit in growth.
The split is important because the hardware miss also dragged down software. CEO Arvind Krishna said the shortfall hit software tied to IBM Z, mostly Transaction Processing. That unit brought in $2.21 billion in the second quarter of 2025, nearly 30% of IBM’s software sales. So if a mainframe order is late, it weighs on two reported lines at the same time.
IBM issued the warning eight days ahead of its scheduled full results. Back in April, the company guided for full-year revenue growth of more than 5% at constant currency and about $1 billion higher free cash flow versus last year. IBM called the latest numbers preliminary and said they could shift. Execs plan to give the full-year outlook on July 22.
IBM stayed at $217.07 in premarket trade Wednesday after the stock closed there Tuesday, erasing about $70 billion in market cap. Revenue came in $660 million short of Street estimates. Adjusted EPS was $2.93, missing the $3.02 target. The market wiped out value more than 100 times the revenue miss, signaling investors saw more than just a timing issue.
| Second-quarter measure | 2025 actual | 2026 preliminary | 2026 consensus |
|---|---|---|---|
| Revenue | $16.98 billion | $17.20 billion | $17.86 billion |
| Reported revenue growth | 8% | 1% | — |
| Software growth | 10% | 5% | — |
| Infrastructure growth | 14% | (7%) | — |
| Adjusted EPS | $2.80 | $2.93 | $3.02 |
Sources: IBM filings and analyst forecasts reported Tuesday. Early numbers for the company’s 2026 outlook are still preliminary.
IBM booked $2.866 billion in hybrid-infrastructure revenue in Q2 2025, starting the reconstruction there. IBM Z jumped 70.2% that quarter, distributed infrastructure dropped 15.1%, both off a 2024 base of $2.360 billion combined. That breaks down to about $1.72 billion in IBM Z revenue and $1.15 billion in distributed for 2025. With the new 37% growth rate, distributed revenue lands close to $1.57 billion.
| Reconstructed portfolio slice | Q2 2025 | Q2 2026 preliminary or estimated | Year-on-year |
|---|---|---|---|
| Total infrastructure | $4.14 billion | about $3.85 billion | (7%) |
| Distributed infrastructure | about $1.15 billion | about $1.57 billion | 37% |
| IBM Z plus Infrastructure Support | about $3.00 billion | about $2.28 billion | about (24%) |
| Total software | $7.39 billion | about $7.76 billion | 5% |
| Red Hat | $1.80 billion | about $1.99 billion | 11% |
| Software excluding Red Hat | about $5.59 billion | about $5.76 billion | about 3% |
IBM’s rounded growth numbers were used for the estimates, so total figures may not match exactly with official results.
A separate look at the figures finds Red Hat made up over half of IBM’s software revenue growth, which was about $369 million. Stripping out acquisitions, the rest of IBM’s software business grew just 3%. IBM called out strong showings from HashiCorp and Confluent but didn’t give revenue details for those units, so performance of older software remains unclear.
Krishna said clients pushed more capex into servers, storage, and memory in late June as they rushed to secure hardware before prices went up. IBM “did not anticipate the magnitude of the capex reprioritization” and “did not adapt and move quickly enough,” he wrote. IBM still had about $500 million in distributed-infrastructure backlog, with those orders not yet booked as revenue. z17 sales were still pacing well ahead of the old mainframe launch at this point. SEC
Chris Beauchamp, chief market analyst at IG Group Holdings (LON:IGG), called it “an ugly moment for IBM and software stocks.” He said the main issue is how long this move to infrastructure and cybersecurity sticks. If it lasts a few more months, that could be fine. But if it drags on, he said, people will start worrying about software demand again. Reuters
The estimated 24% drop is a leftover number, not something IBM broke out as a subsegment. IBM has not reported separate Q2 Z and support dollar revenue, the company rounds its published growth rates, and final results could still shift. Some contracts that got pushed back might still close in Q3. Weakness could stick around or hit Transaction Processing if customers keep steering money to limited hardware and security.
On July 22, IBM needs to clarify how much of the Z and software shortfall it can make up, and if its full-year growth and cash targets from April are still on track. IBM has sold the key products its clients needed fast. Now it needs to show that the rest of its lineup was just delayed, not replaced.
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