Confronting shifting corporate IT spending patterns, IBM cut its 2026 constant-currency revenue growth forecast to 4–5%, down from a prior target of more than 5%. The revision, announced in late July 2026 following an earlier earnings warning, marks a response to clients redirecting budgets toward AI-focused data-centre infrastructure rather than traditional software licences and mainframe systems. This shift is largely driven by the growing demand for high-speed memory as enterprises adopt more complex agentic AI workflows.
Management framed the guidance change as an alignment with more cautious discretionary IT spending, acknowledging that AI workloads now command priority in data-centre planning and are reshaping demand across IBM’s portfolio. The company still expects positive organic expansion, but at a slower pace than envisaged at the start of the year, underscoring how rapidly shifting enterprise priorities can temper growth for established technology vendors.
IBM recasts growth ambitions as enterprise IT budgets pivot to AI workloads, moderating—but not derailing—organic expansion
IBM’s new outlook implies constant-currency revenue growth in the range of 4–5%, with the midpoint below the roughly 4.8% increase embedded in LSEG’s analyst consensus. LSEG data had pointed to revenue of about $70.77 billion under the previous “more than 5%” target, while separate sell-side analysis now places expected revenue nearer $70.3 billion, or around 4.4% growth, broadly consistent with the revised range.
This recalibration positions IBM for a year of moderation after stronger performance in 2025, when the company had entered 2026 expressing confidence in sustaining more than 5% constant-currency growth. The updated guidance also reflects investor scrutiny of execution, deal conversion and segment mix as clients rebalance spending between infrastructure and higher-margin software and consulting.
The guidance reset followed a disappointing second quarter in 2026. IBM reported revenue of about $17.16 billion, up roughly 1% year over year but below expectations clustered between $17.58 billion and $17.85 billion. Adjusted earnings per share missed Street forecasts, and profits were described as thinner than analysts had anticipated, reinforcing concerns about near-term growth momentum and margin resilience.
The earnings shortfall, combined with the earlier warning about evolving IT budgets, provided the backdrop for trimming full-year revenue ambitions and re-emphasising disciplined cost management and capital allocation.
Segment trends highlight the structural shift underlying the outlook cut. Customer spending is increasingly concentrated on AI-oriented data-centre infrastructure, including accelerated compute and storage tuned for large-scale AI workloads, while budgets for mainframe hardware and certain legacy infrastructure categories have come under pressure.
Mainframe hardware sales fell about 42% in the second quarter, a decline that illustrates both the cyclical nature of refresh cycles and intensifying competition for data-centre dollars. This reflects a 42% mainframe decline reported for the quarter, which weighed heavily on overall infrastructure performance. IBM had previously expected infrastructure revenue to decline at a low-single-digit rate, trimming overall company growth by about half a percentage point, with software targeted for double-digit growth and consulting for low-to-mid single-digit expansion to offset that drag.
The new forecast suggests those offsets will be less robust than initially envisaged, as AI-related infrastructure priorities reshape the balance of spending across IBM’s business lines. IBM still anticipates modest, though resilient, expansion.
