rewrite this content and keep HTML tags as is. This is content from rss feed and I don’t need their *Daily Debrief Newsletter*, their tags from bottom like this *Share this articleCategoriesTags*, Editorial Process section, phrases like *Featured image from Peakpx, chart from Tradingview.com*, SPECIAL OFFERS and similar sections – just remove such sections and save only article itself:
Key Points
It’s never good when a CEO admits, “This quarter we faltered.” But that’s the situation facing International Business Machines (NYSE: IBM) this week, as CEO Arvind Krishna made the rare acknowledgment in a letter to shareholders.
Krishna’s acknowledgment came as IBM issued preliminary earnings results for the second quarter, warning that sales were lower than anticipated as customers shifted spending away from IBM and into memory and storage products ahead of anticipated price increases. “These conditions require our teams to execute perfectly, and this quarter we faltered,” he wrote. “We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.”
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IBM stock tumbled 25% — the worst day in its 115-year history — and is now down 26% so far in 2026.
Image source: Getty Images.
But remember, IBM stock had been on the rise before this week’s disaster; shares were up 35% in 2025 on the strength of its mainframe and server business. It’s also a reliable dividend stock, with a 3.1% yield that’s far above average for tech stocks, and has increased the dividend for 31 consecutive years.
Is IBM’s earnings miss an anomaly? Perhaps this is an opportunity to pick up deeply discounted shares.
The case for buying IBM in 2026
As Krishna points out, the biggest problem for IBM right now is that customers are diverting money from the company to storage and memory products. Data centers require ample DRAM and NAND storage, and manufacturers like Micron Technology are reaping the benefits.
However, I see this as a short-term problem. The DRAM and NAND supply is expected to remain tight through the second half of this year, but eventually the supply-demand balance will correct itself.
IBM is rolling out its new z17 mainframes, powered by Telum II processors and Spyre Accelerator chips, to process AI workloads. The z17 allows customers to run AI on the platform alongside their enterprise data, rather than transferring it to the cloud for inference. I expect the z17 to eventually be a significant driver for IBM, even though market conditions are causing revenue to be down this quarter.
Also, IBM is a top company in the growth of quantum computing. It’s on track to deliver the first large-scale fault-tolerant quantum computer by 2029, and plans to invest more than $10 billion in quantum computing in the next five years.
IBM is still projecting $17.2 billion in revenue for the second quarter and year-to-date free cash flow of $4.8 billion when it reports final numbers on July 22. However, I’ll be watching to see if management adjusts its full-year guidance of 5% revenue growth and free cash flow of $15.7 billion. If it can maintain that guidance, then I feel really good about IBM in the second half of the year, and would expect shares of this top dividend stock to begin a steady recovery.
Should you buy stock in International Business Machines right now?
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Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines and Micron Technology. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
