Thread regarding IBM layoffs

[Entire article cited by OP quoted below].

IBM Lowers Its Growth Outlook as Sales of Data-Center Mainframes Sink 42%

Big Blue executive says spending shift won’t last; ‘no evidence of clients moving off mainframe’

By: Anissa Gardizy | Updated July 22, 2026 6:38 pm ET

IBM warned investors on Wednesday that its full-year revenue growth will be lower than it had previously forecast, one week after suffering its worst single-day stock loss in history when executives previewed disappointing results.

The company posted its second-quarter earnings Wednesday, confirming the results that it previewed last week in a rare move that erased about $67 billion in stock market value.

Big Blue’s infrastructure revenue of $3.8 billion was down 7% from a year earlier. That unit was pulled down by lower-than-expected sales of data-center mainframes, which fell 42%.

IBM now expects full-year revenue growth to be in a range between 4% and 5%. Earlier this year, the company projected full-year growth of more than 5%.

Chief Executive Arvind Krishna said the company is in the “early innings of a structural shift for business.”

Even so, he said he believes IBM is well-positioned across its software, infrastructure and consulting businesses to help customers capture value from artificial intelligence.

“With the portfolio we have and the opportunities ahead, it comes down to execution,” Krishna told investors. “That is where we fell short in the second quarter.”

IBM earned $2.2 billion on revenue of $17.2 billion for the three months. It still expects full-year free cash flow to increase by about $1 billion from last year.

In the second quarter, the company failed to close “tens of deals,” which led to the disappointing results, James Kavanaugh, IBM’s chief financial officer, said in an interview with The Wall Street Journal. Since then, the company has closed roughly a third of those deals, he said, adding that the company’s strategy hasn’t changed.

Krishna said that gives IBM “good indication that this was deferral and not destruction.”

IBM took the rare step of preannouncing its results on July 14 in an investor letter in which Krishna wrote that the company had “faltered.” The disclosure sent IBM’s shares down 25%, and they’ve dropped another 5% since then.

Krishna tied the miss to IBM customers redirecting late-quarter budgets toward servers, storage and memory to lock in AI-related hardware before prices rose. He also attributed a pause on some deals to clients reassessing cybersecurity spending.

“I actually believe that even our clients had every intention, until about a month before, that they were going to consummate these deals,” Krishna said, referring to the second quarter transactions IBM failed to close. He suggested that his customers “had not really thought through” the fact that some of their spending on other hardware was increasing as much as it did.

“When they were faced with that issue, then they decided to move budget to those areas,” he said.

IBM doesn’t expect supply-chain constraints in the AI infrastructure market to improve in the near term.

“Everyone in the industry is saying this will extend for a period of time,” Kavanaugh said.

The headwinds facing IBM are a different threat from the software-replacement fears that have weighed on Salesforce, Workday and Snowflake. IBM’s warning suggested AI infrastructure spending is now displacing hardware budgets, too—squeezing a company whose customers install traditional systems in their own data centers and can defer big-ticket upgrades such as mainframes.

IBM’s board of directors has debated how to explain its recent results to investors. Ultimately, they agreed to disclose the results in a bid to gain credibility with investors for transparency. The Journal reported that as of last week, the firm hadn’t decided whether it could share forward-looking guidance with investors.

The episode has put Krishna’s leadership under scrutiny and made the company, which employs 260,000 people, the subject of breakup and activist speculation. The board is expected to meet again in late July, and board members are facing pressure from an impatient Wall Street that is unlikely to tolerate several more quarters of underperformance.

Much of IBM’s revenue is tied to its data-center business, where it sells servers known as mainframes to enterprise customers such as financial-services firms and retailers. That means IBM hasn’t benefited from the bo-m in spending on AI infrastructure that has boosted some of its peers, including Nvidia, Amazon Web Services and Advanced Micro Devices.

Kavanaugh said that despite the rough quarter, IBM’s infrastructure business should grow in the second half of the year, although mainframe sales are expected to be lower than last year.

There have been some fears that AI tools could help some enterprises modernize their workloads, which could result in them moving off of mainframes entirely and instead renting computing capacity from cloud providers. Kavanaugh, though, said IBM sees “no evidence of clients moving off mainframe.”