IBM Just Cut Its Own Guidance. Mainframe Sales Fell 42%.
A century-old tech company just issued a message to Wall Street that it wasn't being optimistic enough about its outlook. IBM's stock fell 13.8% after the company lowered its 2015 revenue growth outlook from "above 5%" to 4-5% due to weak sales of its mainframe computers.
Revenue for Q2 2026 grew a scant 1% year-over-year to $17.16 billion, which fell short of the consensus estimate of about $17.6 billion. The adjusted figure of $2.93 was also in line with estimates, but this figure concealed a bumpy fourth quarter.
Infrastructure revenue dropped by 7%, the biggest part of which was a 42% decline in Z mainframe sales, the end of a previous cycle of mainframe upgrades. “This year the capital spending is being reallocated from hardware refresh to AI infrastructure,” said CFO Jim Kavanaugh.
At the same time, software, IBM's growth engine, was up just 5% to $7.76 billion, which was behind the 10%+ target that management had set for the year. Revenue in the data segment increased by 19% year-over-year, while Red Hat revenue increased by 11%.
A real crypto-adjacent angle. IBM also made a letter of intent commitment to create a US quantum chip foundry in the same earnings period.
One of the more discussed long-term threats to current blockchain cryptography is the advances of quantum computing, and IBM is one of the few companies to be releasing tangible roadmaps in the area.
IBM isn't the only one chasing headlines and getting involved in the AI capex shift. However, IBM also announced an internal AI coding assistant called Bob that has been adopted by over 80,000 of its employees.
The broader picture: IBM, Tesla and Alphabet all made earnings reports this past week, and each of them indicated the same mix of high investment in AI and short-term profitability.
That's one reason that risk assets in general, and cryptocurrencies specifically, have been choppy in the lead-up to the Fed meeting next week.
This is not financial advice.
Does IBM's quantum foundry bet change how seriously you take long-term blockchain security risk, or does that still feel like a distant, theoretical concern? Let's hear it.
