NEW YORK, April 23, 2026, 10:38 EDT
IBM slid around 9.5% early Thursday, despite topping first-quarter expectations—investors remained wary that fresh AI offerings could threaten its software and consulting segments. ServiceNow shares tumbled 17.5%; the iShares Expanded Tech-Software ETF dropped 5.6%.
The ripple from IBM’s report stretches further than the company itself. As one of the earliest major enterprise software names to post results this season, IBM set the tone: Thursday’s action showed investors are looking for evidence that AI can actually boost software profits, not just drive up demand for chips and data center hardware. Texas Instruments popped 15.9% after delivering a strong forecast. The iShares Semiconductor ETF booked a 2.1% gain, underscoring the split across the tech space.
IBM reported a 9% jump in revenue to $15.9 billion for the quarter ended March 31. Adjusted earnings hit $1.91 a share, beating the $1.81 consensus. Software sales climbed 11% to $7.1 billion, consulting revenue added 4% to $5.3 billion, and infrastructure posted a 15% rise to $3.3 billion. The company stuck to its full-year guidance: revenue growth topping 5% at constant currency and roughly $1 billion in additional free cash flow, which excludes capital expenditures.
Slowing growth was the sticking point. Total revenue increased at a softer pace after last quarter’s 12.2% gain, while software growth decelerated to 11.3%. Red Hat, central to IBM’s hybrid-cloud push, managed a 13% rise. Guidance? No change, leaving investors looking for something more.
Doubts have lingered over the stock since February, after Anthropic announced its Claude Code tool might bring COBOL, the aging but still crucial language on IBM mainframes, into the modern era for banks, insurers, and government agencies. That day, IBM shares plunged 13.2%—a one-day fall not seen since 2000—as investors started to question whether tasks that once took large consulting teams could suddenly get automated.
Brooks Idlet at CFRA called the pressure on IBM’s results “higher than normal.” IBM executives fired back. CFO James Kavanaugh pointed to Watsonx Code Assistant, arguing its customers were ramping up mainframe usage and describing generative AI as an “accelerator” for modernization. CEO Arvind Krishna stuck to his stance, labeling AI a continuing “tailwind” for IBM’s business. Reuters
ServiceNow topped its own first-quarter targets and lifted its full-year subscription revenue forecast, with CEO Bill McDermott touting AI growth that was “far exceeding” expectations. Customers spending at least $1 million annually on Now Assist more than doubled, up over 130%. Still, the company flagged delayed deals in the Middle East, which trimmed about three-quarters of a percentage point from quarterly subscription growth. The stock sank roughly 17.5% in morning trading. ServiceNow Investor Relations
Losses rippled through peers exposed to the same trade. Salesforce slipped roughly 8.6%, Adobe dropped 7.8%, and Microsoft shed 3.2% in early trading. That deepens a slide that’s already dragged the software ETF down around 16% for the year. Meanwhile, the semiconductor ETF has soared past 43%.
The downside risk hasn’t gone away. IBM’s infrastructure segment continues to post solid gains, and ServiceNow raised its forecast, with both sets of executives saying AI demand is ramping up. But a weak consulting environment and the spread of AI agents into basic software and modernization could weigh even harder on valuations.
Kiran Ganesh, a strategist at UBS, sees technology markets headed into what he called a “bigger range of outcomes.” Judging by Thursday’s action, traders are still backing firms building AI infrastructure, but they’re pressing software names like IBM to prove the AI push isn’t eroding their main businesses. Reuters
