To The Moon

$IBM(IBM)$’s second-quarter results reveal that corporate AI spending remains strong but highly selective. Enterprises are prioritising computing infrastructure while delaying some software, consulting and mainframe decisions.

Quarterly revenue increased only 1% to $17.16 billion. GAAP net income was $2.2 billion, while adjusted earnings reached $2.93 per share. IBM reduced its constant-currency 2026 revenue-growth forecast from more than 5% to 4%–5%, although it maintained guidance for free cash flow to increase by approximately $1 billion year over year. IBM’s official July 22 release contains the results and revised outlook.

The segment figures explain the disappointment:

• Software revenue increased 5% to $7.76 billion.

• Consulting revenue was approximately flat at $5.33 billion.

• Infrastructure revenue declined 7% to $3.84 billion.

• IBM Z mainframe revenue fell 42%.

There were pockets of strength. Red Hat revenue increased 11%, Data products grew 19%, and distributed infrastructure rose 37%. IBM also said Red Hat, watsonx, HashiCorp and Confluent continued to perform well.

The bearish interpretation is that IBM is losing budget priority. Companies facing limited capital may be directing funds toward GPUs, networking equipment and data-centre capacity before spending on IBM’s software modernisation and consulting services. Reuters’ July 22 report describes the spending shift and delayed large transactions.

The more constructive interpretation is that demand was deferred rather than cancelled. Management said approximately one-third of the delayed large transactions had already closed during the third quarter. IBM also continues to improve productivity through automation, allowing it to maintain its free-cash-flow outlook despite lower revenue expectations.

Still, acquisitions add financial risk. IBM spent $10.5 billion on acquisitions during the first half and ended June with $62 billion of debt, while cash and marketable securities declined by $6.3 billion from year-end to $8.2 billion. Acquired growth must eventually produce enough incremental cash flow to justify the added capital and integration risk.

IBM Weekly Chart

The stock’s post-results decline was severe, reflecting both the guidance reduction and damage to IBM’s recent growth narrative. When a share gaps down after guidance is cut, the previous support area often becomes resistance as shareholders use rebounds to reduce exposure. Stabilisation requires more than one strong session: the market will likely want evidence that delayed contracts are closing and Software growth is reaccelerating.

$IBM(IBM)$’s weekly chart is approaching a major $195–$208 support zone, but the unusually large bearish candle and sharp momentum deterioration make the stock unsuitable for an immediate bullish entry because support has been reached without any clear reversal confirmation. The stronger setup would be to wait for IBM to stabilize within this range and produce a bullish weekly reversal, ideally reclaiming $208–$210; if that occurs, a 45–60 DTE $190/$180 bull put credit spread could benefit from elevated volatility and time decay while positioning the short strike below the key support area. A more directional alternative would be a $210/$230 call debit spread after the reclaim, targeting an initial recovery toward $225–$240. Conversely, a decisive weekly close below $195 would invalidate the support thesis and could expose IBM to further downside toward approximately $180–$185, in which case bullish premium-selling trades should be avoided.

The evidence leans bearish in the near term because $IBM(IBM)$ missed expectations, reduced revenue guidance and showed weakness across Consulting and mainframes. The view would be invalidated by rapid conversion of delayed deals, accelerating Red Hat and software growth, and unchanged free-cash-flow guidance translating into actual second-half cash generation. This is personal opinion for education and is not financial advice.

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Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The views expressed are personal opinions based on publicly available information and are subject to change without notice. Investors should conduct their own research and consider their financial situation, risk tolerance, and investment objectives before making any investment decisions. I do not guarantee the accuracy or completeness of the information presented.