NEW YORK, July 21, 2026, 5:10 p.m. EDT
International Business Machines NYSE:IBM requires approximately $10.9 billion in free cash flow during the second half to maintain its earlier 2026 goal. This figure is 10% higher than what was recorded in the same period last year.
The focus is now on the numbers, rather than the quarter itself. IBM disclosed major Q2 figures in advance on July 14. Attention during Wednesday’s call is likely to be centered on guidance and cash conversion.
Earlier guidance suggested approximately $15.7 billion for the year. Initial first-half cash flow totaled $4.8 billion, the same as in 2025.
| Cash-flow measure | 2025 actual | 2026 using prior guidance |
|---|---|---|
| First half | $4.8 billion | $4.8 billion, preliminary |
| Second half | $9.9 billion | $10.9 billion required |
| Full year | $14.7 billion | Roughly $15.7 billion |
| H2 growth | n/a | 10.1% compared with 2025 |
The second-half 2026 number is an estimate. IBM is set to revise its annual outlook on Wednesday.
With a market capitalization of $200.4 billion on Tuesday, the target translates to a free-cash-flow yield of 7.8%. Reducing it by $1 billion would decrease the yield by roughly 0.5 percentage point.
The U.S. cash markets did not operate at the dateline. Shares declined 1.2% on Tuesday to $210.50, leaving the price 3% under the July 14 close.
The slide on the warning day exceeded 25%, wiping away around $69 billion in market capitalization.
IBM’s preliminary second-quarter revenue increased by 1% to reach $17.2 billion, falling short of analysts’ average forecast of $17.86 billion by 3.7%. Adjusted earnings stood at $2.93 per share, trailing estimates by roughly 3%.
Software revenue increased by 5%, but infrastructure declined 7%. Red Hat’s growth quickened to 11%. Transaction Processing and IBM Z did not meet targets.
Chief Executive Arvind Krishna stated, “This quarter we faltered. We did not adapt and move quickly enough.” IBM Newsroom
Krishna stated that clients redirected funds to servers, storage, and memory. Additionally, some significant deals failed to reach completion by their anticipated closing dates.
Distributed infrastructure increased by 37%, closing June with a backlog of $500 million. This sets up a conversion challenge for the second half.
Chris Beauchamp, chief market analyst at IG Group Holdings LON:IGG, stated, “The big question will be how long the shift to infrastructure and cybersecurity lasts.” Reuters
Stifel Financial’s NYSE:SF David Grossman lowered his price target to $235 from $290 on Monday, while maintaining a buy rating.
The dividend continues to be supported by the previous cash target. The quarterly payout of $1.69 results in a yield of 3.2%. Projected cash coverage stands at approximately 2.4 times.
IBM is set to release its final second-quarter results on Wednesday, July 22, at 5 p.m. EDT. Investors will watch for updates on full-year cash flow, any delayed deals, and demand for the z17.
Risks: These figures are initial and subject to minor revisions. A permanent change in capital expenditure or a reduction in guidance would reduce the cash buffer.
The 7.8% yield at $210.50 relies on IBM providing the cash.
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