International Business Machines saw its IBM Z mainframe line fall 42% in fiscal Q2 2026, while distributed infrastructure, covering Power and Storage, jumped 37%. Total revenue rose only 1% to $17.2 billion, and management updated its full-year outlook to 4% to 5% constant-currency growth. Software, IBM's highest-margin segment, grew 5% in the quarter, slower than the 7.9% pace across the first half, with a segment profit margin of 32.2% and an 82.6% gross margin; Red Hat grew 11% and the data business grew 19%. Consulting was flat at $5.3 billion, free cash flow of $2.5 billion slipped $0.3 billion from a year earlier, and debt totals $62.0 billion after $10.5 billion of acquisitions this year. At 18.00 times expected earnings as of October 6, IBM trades near its five-year average of 18.18 and below the sector's 23.77, with expected EPS growth of 6.80% for 2027.
International Business MachinesIBM Z mainframe sales fell 42% and total revenue rose only 1% to $17.2B, with software growth slowing to 5% and free cash flow down $0.3B.
Red Hat grew 11% within IBM's software segment, outpacing the segment's 5% growth.
