IBM Q2 2026 Prelim Revenue Miss Sparks 25% Share Drop

Introduction: IBM warns on Q2, shares slide

IBM shares fell sharply on Tuesday after the company released preliminary second-quarter results that pointed to revenue and earnings coming in below Wall Street expectations. The stock fell 25.06% to $117.41 following the update, after dropping as much as 23% in premarket trading. IBM said revenue for the three months ending in June came in at $17.2 billion, compared with analysts’ expectations that ranged around $17.86 billion to $17.9 billion, according to figures cited from LSEG data and other reports included in the update. The company also guided to adjusted earnings per share of $1.93, below analyst estimates of about $1.01 to $1.02. IBM said it is still reviewing its accounts and that final results could vary slightly. The warning landed at a time when enterprise technology spending is being reshaped by artificial intelligence infrastructure needs. Management blamed the shortfall on a late-quarter shift in customer spending toward hardware categories such as servers, storage, and memory.

What IBM reported in preliminary Q2 numbers

IBM’s preliminary revenue for the quarter was stated at $17.2 billion. Reports in the update also said overall revenue rose about 1% to that level, implying modest growth but still below expectations. On profitability, IBM said adjusted EPS was $1.93 for the quarter. Separately, IBM reported a preliminary 2% decline in diluted earnings to $1.27 per share. In addition to missing estimates, IBM pointed to deal execution issues, with management indicating that several large deals did not close on the expected timelines. The company framed the release as preliminary and cautioned that the final numbers could shift slightly after ongoing review of accounts. Investors reacted to the combination of a miss versus consensus and management’s explanation that the company did not move quickly enough as customer buying patterns changed.

Why spending shifted: servers, storage, memory and chips

IBM tied the miss to a rapid reallocation of customer capital spending in the last few weeks of June. CEO Arvind Krishna said clients moved their quarterly capital spending toward servers, storage, and memory, and in Spanish-language reporting included in the text, toward “chips y servidores.” He said companies were trying to secure infrastructure supply ahead of expected price increases. Krishna also said IBM had expected some supply-chain impact, but not the scale of the shift in spending. The company’s comments connected the spending shift to broader AI-related infrastructure demand, where budgets are being directed to components required to support AI workloads. The result, according to the update, was that some spending moved away from IBM’s products during the period. That change appeared late in the quarter, reducing IBM’s ability to offset the impact through sales execution.

Execution issues: “We did not adapt and move quickly enough”

Krishna said in a letter to investors, “We did not adapt and move quickly enough.” He also wrote that IBM “faltered” in adapting to changing market conditions. Management linked the revenue and earnings shortfall to deal timing, stating that numerous large deals did not close within the expected timeframe. In the Spanish-language text included, Krishna said results were worse than expected and pointed to IBM’s Z mainframes and associated software as contributing significantly to the shortfall. The same reporting described the quarter as one where conditions demanded flawless execution, but IBM fell short on speed and responsiveness. These statements mattered to markets because they framed the miss as partly self-inflicted through execution, not only macro-driven. IBM also cited supply-chain expectations, but emphasized that the surprise was the scale of customers diverting budgets.

Segment signals: infrastructure pressure and a software bright spot

A recurring theme across the provided reports was pressure on IBM’s infrastructure business. Infrastructure revenue was described as falling 7% year-on-year, and Spanish-language reporting also stated the infrastructure division’s sales were “especially affected,” with a 7% decline. At the same time, one report said overall revenue “barely grew 1%,” consistent with the preliminary revenue figure. The text also highlighted a relative bright spot in Red Hat, where software growth accelerated to 11%, though it was not enough to offset the broader miss in the quarter. The mix described in the update suggests that while parts of IBM’s software portfolio were growing, the late-quarter customer push toward third-party infrastructure purchases weakened IBM’s expected close rates and shifted spending away from the company’s offerings.

Stock move and intraday risk framing

The market reaction was swift. IBM shares fell as much as 23% in premarket trading after the preliminary update, and later figures in the text reported a 25.06% drop to $117.41. Another snapshot in the supplied material listed IBM at $117.37, down 25.10%, at 10:19 AM Eastern. Spanish-language reporting said shares fell more than 21% premarket. One report noted that if the downtrend held, IBM could face its largest intraday loss since the 1980s. Regardless of which reference point investors used, the message was consistent: markets repriced IBM materially after the company disclosed preliminary Q2 figures below expectations and acknowledged slower adaptation to customer spending shifts.

Other factors cited: delayed deal closings and cybersecurity distraction

Beyond the spending shift, the text pointed to operational factors that weighed on results. Management flagged that several large deals failed to close on time. Another element mentioned was that cybersecurity concerns across the tech industry distracted clients during the quarter, contributing to delays. The combination of delayed closings, sudden reallocation of budgets, and supply-chain concerns created a quarter where the company’s forecast and execution assumptions did not hold. These factors also shaped broader investor concerns that enterprise clients may be prioritising AI-related infrastructure over some software and consulting spending, at least in the near term.

Key figures at a glance

Market impact: what investors are reacting to

The immediate impact was a steep sell-off, reflecting disappointment on both revenue and adjusted EPS versus expectations. Investors also reacted to IBM’s own framing that it did not adapt quickly enough, which raises questions about sales execution under fast-changing enterprise budget priorities. The customer spending shift described by management is relevant to the wider enterprise IT space because it signals how AI infrastructure demand can crowd out other tech spend near quarter-end. The update also mentioned delayed large deal closings, which can have an outsized impact on quarterly performance for companies with big-ticket enterprise contracts. In the supplied text, the weak print was also described as pressuring sentiment across the broader software and enterprise IT space. Another report referenced spillover worries into peers, with IBM’s miss being interpreted as a sign of potentially softer enterprise software spending.

Analysis: why this quarter mattered for IBM’s AI narrative

The preliminary Q2 update matters because it connects AI-related infrastructure demand to near-term disruption in customer purchasing patterns, even for a large incumbent like IBM. Krishna’s explanation suggests the swing happened late in the quarter and was driven by customers attempting to lock in hardware supply ahead of expected price increases. IBM’s acknowledgement that it misjudged the scale of the shift, and that it fell short on execution and deal timing, compounded the impact. The 7% infrastructure revenue decline highlighted in the text provides a concrete data point that the segment was under pressure during this period. At the same time, the mention of 11% growth at Red Hat indicates that not all parts of IBM’s portfolio were weak, but the mix did not prevent the company-wide miss. For investors, the combination of a miss, an execution admission, and a clear customer spend rotation created a high-information event that quickly reset expectations.

Conclusion

IBM’s preliminary second-quarter results pointed to revenue of $17.2 billion and adjusted EPS of $1.93, both below the estimates cited in the reports, triggering a roughly 25% share price drop. Management attributed the miss to a late-quarter shift in client spending toward servers, storage, and memory, ahead of expected price increases, alongside delayed deal closings and other distractions such as cybersecurity concerns. IBM said it is still reviewing its accounts and final results could vary slightly. The next key milestone will be the company’s finalised quarterly results and any additional detail it provides on deal timing, infrastructure performance, and customer budget patterns.