** Shares of IBM IBM.N fall 5.5% to $266.32 premarket

** Company, after market close on Wednesday, reported strong Q2 revenue and profit, but weaker-than-expected software sales

** Customers channeled investments into IBM's AI-specialized mainframes diverting revenue away from transaction processing, which is housed within the software unit, IBM finance chief Jim Kavanaugh told Reuters

** "We suspect there will likely remain some debate surrounding IBM's ability to sustain/accelerate their software growth in H2 as y/y compares in RHT (software provider Red Hat) become more difficult," Evercore ISI analysts say

** IBM's "AI book of business", which combines bookings and actual sales, grew to $7.5 billion, up $1.5 billion from the previous quarter

** "The strength of the hardware refresh led to customers re-prioritizing spend for capacity expansion, creating headwinds to transaction processing, which declined 2%," RBC Capital Markets analysts say

** Up to last close, shares up 28% YTD

(Reporting by Zaheer Kachwala in Bengaluru)

((Zaheer.Kachwala@thomsonreuters.com))