IBM RELEASES SECOND-QUARTER RESULTS

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IBM reported Q2 2026 results with a guidance upgrade: the company now targets full-year constant currency revenue growth of 4-5% (up from prior expectations) and continues to expect free cash flow to increase roughly $1B year-over-year. CEO Arvind Krishna attributed the improvement to early-stage structural demand for AI-driven enterprise transformation, with IBM's software portfolio — watsonx, Red Hat, HashiCorp, and Confluent — leading performance. A notable surprise came from IBM's infrastructure segment: Power and Storage grew at a record pace in Q2 and has built an order backlog of nearly $500M, reversing the narrative that IBM's hardware business is in secular decline. To capture broader enterprise AI demand, IBM is expanding sales coverage to thousands of additional clients and hiring Forward Deployed Engineers — a Google-style role — to support production AI deployments. Two forward bets stood out in the announcement: Lightwell, an AI-powered open-source vulnerability patching tool that delivered 7,500+ patches in its first two weeks; and a U.S. Department of Commerce letter of intent to build Anderon, described as the world's first pure-play quantum wafer facility. Both signal IBM's intent to compete at the infrastructure and security layers of the AI stack, not just at the application level. Currency is expected to be neutral to growth for the full year, making the constant currency guidance essentially a direct read on business performance.