Despite lowering guidance for revenue, IBM maintained its expectation for free cash flow to increase by about $1 billion in 2026

IBM maintained its expectation for free cash flow to increase by around $1 billion this year.

International Business Machines cut its outlook, but for analysts, the most important thing now is meeting those new targets.

IBM $(IBM)$ said Wednesday it expects revenue growth on a constant-currency basis to reach between 4% and 5% for the year, lower than a previous forecast of above 5%.

"Results were relatively in-line with our revised forecast post-preannouncement, with better than expected guidance for the full year, but IBM now needs to execute to build investor confidence in the outlook," strategists at J.P. Morgan led by Brian Essex wrote in a note on Thursday.

Despite lowering guidance for revenue, the technology company maintained its expectation for free cash flow to increase by about $1 billion in 2026.

For J.P. Morgan, this was a "bright spot" in IBM's second-quarter earnings results, with the investment bank expecting a lowering in forecasts there as well. The strategists noted that commentary on the Armonk, N.Y.-headquartered company's earnings call conveyed confidence that the tens of large deals which led to revenue of $17.16 billion in the quarter, below estimates of $17.58 billion, were delayed as opposed to missed, with a third of them closing in July.

"Management tone on the call was constructive, and we are encouraged by commentary that pointed to pushed deals rather than long-term disruption, with a better than expected outlook for the remainder of the year," the strategists said, adding that they don't see IBM's stock price recovering until there's evidence of the company reaching that revenue target.

Shares of IBM slid 2.5% in premarket trading after falling more than 2% during Wednesday's session before the company reported results for the three months that ended June 30.

Analysts at Stifel led by David Grossman wrote in a note on Wednesday that the missed deals were one of the biggest disclosures in the results, outlining that it's not clear when they were closed but that the company made it clear prices were not reduced to speed up processes.

Param Singh and Jake Heimowitz, analysts at Oppenheimer, said they see it taking several quarters before IBM can recover to constant currency upward of 5%. For this to happen, the analysts said they would want the company to prioritize organic growth as opposed to completing large acquisitions and to finalize the deals that were delayed in the previous quarter.

-Nora Redmond

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July 23, 2026 09:35 ET (13:35 GMT)

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