NEW YORK, April 23, 2026, 10:27 AM EDT
- IBM slid 9.9% by late morning, despite first-quarter revenue and profit topping forecasts. Software growth lost steam, and the company kept its 2026 outlook unchanged.
- This isn’t just about IBM—software stocks have struggled in 2026, with investors shifting cash toward AI chip plays and sidelining names viewed as vulnerable to automation.
- IBM points to AI as a boost for mainframe adoption and cash generation, though investors are zeroed in on how artificial intelligence might impact demand in the software and consulting segments.
IBM slid 9.9% to $226.84 as of 10:12 a.m. EDT Thursday, despite posting better-than-expected revenue and profit. Investors zeroed in on sluggish software growth and an unchanged full-year outlook, leaving the stock deep in the red.
The selloff hits as software stocks suffer through a months-long rout, with worries swirling that fresh AI tech could automate chunks of coding, workflows, or older system maintenance—the sort of work once considered defensible. Reuters flagged the iShares Expanded Tech-Software ETF off roughly 16% in 2026, while the iShares Semiconductor ETF has surged over 43%. The gap could hardly be clearer: investors are dividing the field into AI winners and likely casualties.
IBM posted first-quarter revenue of $15.92 billion, a 9% gain, with adjusted earnings at $1.91 per share—beating the $1.81 consensus from LSEG data. Software sales jumped 11.3% to $7.05 billion. Consulting revenue came in 4% higher at $5.27 billion, while infrastructure saw a 15.2% boost to $3.33 billion.
The real drag on the stock came after the quarter. IBM left its 2026 goal unchanged—still targeting more than 5% revenue growth at constant currency, and roughly $1 billion more in free cash flow, even after topping expectations. No bump to that outlook. The quarterly dividend, though, is headed higher, up to $1.69 per share.
CFRA analyst Brooks Idlet flagged the market’s heightened anxiety over AI rivalry this quarter, but following the release he said: “we do not think Q1’s results validated those fears.” Reuters
IBM didn’t hold back. CEO Arvind Krishna insisted AI “continues to be a tailwind for our global business.” CFO James Kavanaugh, speaking with Reuters, doubled down: “Gen AI in modernization of mainframe is actually an accelerator.” IBM Newsroom
IBM flagged its cash flow and usage patterns as well. On the call, Kavanaugh put free cash flow for the quarter at $2.2 billion—that’s the company’s strongest first-quarter showing in ten years. He also noted that clients running watsonx Code Assistant for Z are expanding MIPs capacity, that’s mainframe processing, at triple the pace of those who haven’t adopted the tool.
IBM wasn’t the only casualty. According to Reuters, ServiceNow’s latest quarter stirred up fresh AI jitters in the software space. Microsoft and Adobe shares slipped ahead of the open, a reminder of how one shaky report or a wary forecast can send ripples through the sector.
That risk became reality in February: IBM shares logged their sharpest single-day fall in over a quarter century when Anthropic claimed its Claude Code could update COBOL “in quarters instead of years.” Banks, insurers, and government agencies still run on COBOL, the decades-old language powering IBM’s mainframes. Reuters
The risk scenario is still on the table. Should clients decide AI really does shrink both time and headcount for legacy-code projects, IBM’s software and consulting arms might keep posting choppy growth—even with solid mainframe sales. On top of that, if geopolitical tensions begin slowing down enterprise deals more widely, IBM’s steady outlook could face sharper questions. IBM noted that Middle East events didn’t affect its first quarter, but also acknowledged ongoing uncertainty. ServiceNow, for its part, flagged regional deal delays.
IBM turned in another quarter of upside on profit, solid infrastructure sales, and consistent cash flow—though the hoped-for momentum in software still hasn’t shown up. Management stuck to its 2026 targets, but investors weren’t buying it; shares slipped.
