IBM cuts 2026 growth forecast after weaker quarter, says AI push is boosting productivity

IBM said only about 2% of its software could be replaced by applications built with artificial intelligence models, as Chief Executive Arvind Krishna sought to reassure investors after a weak second quarter driven by a sharp slowdown in mainframe-related business. Krishna said most of IBM’s software helps customers prepare data and infrastructure for AI workloads and should benefit rather than be displaced. The comments came after IBM lowered its 2026 constant-currency revenue growth forecast to 4% to 5% from more than 5% and reduced its software growth outlook to 6% to 8%. Second-quarter revenue rose about 1% to $17.2 billion, matching analyst estimates, while diluted earnings rose 5% to $2.93 a share. Z mainframe revenue fell 42% in the quarter, and transaction processing software dropped 9%, reversing first-quarter gains of 48% and 2%, respectively. Finance chief Jim Kavanaugh said some customers redirected spending toward servers and storage as memory prices rose because of AI chip demand. Krishna said software tied to mainframe capacity tends to lag hardware and could recover over the next year. He also said about 75% of deals that slipped from the second quarter should return before year end, though Jefferies said it would wait for more of that activity to appear in reported results before giving full credit to IBM’s maintained guidance. IBM shares are down about 30% this year.