IBM’s Credibility Test: Can Delayed Deals Rescue a Mainframe Meltdown?
Published on 07/24/2026 at 13:13 | Redaktion boerse-global.de
IBM is navigating one of its most turbulent periods in decades, with the stock trading near 52-week lows after a brutal second quarter that saw mainframe revenue collapse by 42%. The shares closed at €181.74 in Frankfurt on July 23, barely above the trough of €175.14, and have shed 30.07% since the start of 2026. The sell-off accelerated after a historic single-day rout on July 14 — the worst since at least 1968 — triggered by a pre-announcement that warned of a significant revenue shortfall.
The root cause is a dramatic shift in corporate spending. Clients are pouring budgets into AI hardware and storage, leaving traditional mainframe systems in the dust. IBM’s infrastructure unit fell 7% to €3.84 billion in the second quarter, while the company slashed its full-year software growth forecast from double digits to a range of 6% to 8%. CEO Arvind Krishna now expects constant-currency revenue growth of 4% to 5% for 2026, down from the previous target of over 5%.
Wall Street has responded with a flurry of downgrades and price-target cuts. Morgan Stanley maintained its “Equal-Weight” rating but slashed its target from $293 to $190. BMO Capital lowered its target from $270 to $230, while Goldman Sachs — still bullish with a “Buy” rating — reduced its target from $335 to $270. The consensus analyst target now sits at €238.58, implying roughly 31% upside from current levels, though the wide dispersion in estimates reflects deep uncertainty about the trajectory.
Management is betting everything on a timing argument. Krishna insists the mainframe slump is temporary, not structural, and points to early signs of recovery: one-third of the delayed deals have already returned in the third quarter, with 75% expected to close by year-end. The software business offers some support, growing 5% to €7.76 billion in the second quarter, powered by an 11% gain at Red Hat. With 80% of software revenue now subscription-based, the argument goes, the infrastructure hiccup should prove short-lived.
Should investors sell immediately? Or is it worth buying IBM?
Yet the risks are mounting. The annualized 30-day volatility has surged to over 84%, reflecting extreme market jitters. Chip prices have climbed roughly 60% year-over-year, squeezing customer budgets further. And a legal cloud hangs over the stock: law firms are probing whether IBM misrepresented the strength of its deal pipeline before the July 14 warning, with the conversion rate of closed contracts under scrutiny. The company says it is cooperating with investigators.
The technical picture underscores the strain. The relative strength index sits at 31.5, signaling oversold conditions, while the stock trades about 20% below its 50-day moving average and nearly 22% below the 200-day average of €234.12. A recovery to that level would require a convincing narrative that the third quarter delivers the promised sequential improvement in deal closures.
IBM is not standing still. The company is investing $10 billion in quantum computing, including the acquisition of HRL Laboratories, and its AI coding assistant “Bob” is now used by over 80,000 employees. But for now, the market is focused on the here and now. The next major test comes with the quarterly dividend of $1.69 per share, payable September 10 to holders of record on August 10 — a payout IBM has maintained continuously since 1916. More critically, the third-quarter results will determine whether the returning deals are the start of a broad recovery or an isolated blip.
IBM at a turning point? This analysis reveals what investors need to know now.
If software growth remains stuck in single digits and the mainframe business fails to deliver the “record year” that CFO Jim Kavanaugh has promised, the narrative could shift decisively. IBM would risk being viewed as a legacy player losing relevance in an AI-driven economy. For now, the stock is caught in a waiting game — one where every data point on deal conversions and cash flow will be scrutinized for signs of life.
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