- IBM
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Shareholders of International Business Machines (NYSE:IBM) have had a difficult 2026. The stock is down about 22% year to date as of this writing, trading near $230 — roughly 30% below the record close of $329.23 it set on June 2.
Most of that damage arrived in a single session. Shares fell about 25% on July 14, when IBM reported preliminary second-quarter results that fell short of the company’s own expectations. The lowered full-year outlook came on July 22, with the final report.
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A sell-off like this invites a longer view, though. Where could IBM stock be five years from now?
Growth slowed, and guidance followed
What made July especially painful was how strong the year had looked. IBM increased revenue 8% in 2025, to $67.5 billion. Free cash flow of $14.7 billion was up $2 billion from the previous year.
The momentum carried into 2026. First-quarter revenue rose 9% year over year, and software revenue jumped 11%.
Then the second quarter broke the pattern. Revenue of $17.2 billion was up just 1% year over year. Software revenue growth slowed to 5%, under half the first quarter’s pace. Consulting revenue was flat. And infrastructure revenue fell 7%, with IBM Z, the mainframe business, down 42% as the z17 launch cycle wound down.
Management now expects revenue to increase 4% to 5% this year in constant currency, down from the more than 5% it still expected in April.
In a July 14 letter to investors, CEO Arvind Krishna pointed to clients moving spending toward servers, storage, and memory ahead of expected price increases, and to large deals that did not close on time.
“These conditions require our teams to execute perfectly, and this quarter we faltered,” he said.
However you assess those explanations, the slowdown that concerns me is software’s. It’s the segment that underpins IBM’s growth case. Mainframe cycles come and go. But a software slowdown is more difficult to dismiss.
Cash flow and the dividend
For all the top-line problems, IBM’s cash generation has held up. Management still expects free cash flow to grow by about $1 billion in 2026, which would put the full-year total near $15.7 billion.
That cash supports one of the longest dividend growth records in technology. April’s increase, to $1.69 per share quarterly, was IBM’s 31st in a row, and the company has paid quarterly dividends since 1916. At the current share price, the stock yields just under 3%.
