Arvind Krishna highlighted IBM’s software growth and rising infrastructure demand.
- IBM’s software revenue grew 9% in Q3, infrastructure rose 5%, and consulting increased 2%.
- CEO said IBM’s distributed infrastructure grew 32%, while its Z17 mainframe added over $1 billion in revenue across six quarters.
- IBM shares had plunged over 25% in July after grim preliminary results for Q2.
International Business Machines Corp. (IBM) stock is heading for its best week since June after the company’s fiscal third-quarter (Q3) 2026 results highlighted strong software growth and infrastructure demand. CEO Arvind Krishna said Q2 weakness “reflected timing rather than underlying demand,” while distributed infrastructure surged 32%, providing optimism about mainframe momentum and enterprise AI spending.
International Business Machines stock traded over 4% lower overnight, reversing nearly 4% gains in the regular session.
Software Leads IBM’s Business Growth
IBM’s software division grew 9% in Q3, while infrastructure revenue rose 5%. Consulting also showed a modest improvement of 2%, Krishna said during the company’s Q3 earnings call.
“Transaction processing grew 10%, underscoring the strategic importance of the mainframe and validating our view that the softness we saw in the second quarter reflected timing rather than underlying demand.”
IBM’s Mainframe Momentum Continues
IBM’s distributed infrastructure business grew 32% in Q3, boosting overall infrastructure revenue. Its latest Z17 mainframe platform also performed well.
“Z17 continued the strongest innovation cycle in the platform’s history, generating more than $1 billion of incremental revenue over 6 quarters compared with prior programs. This reflects the security, reliability, scalability and compelling economics of the platform. As infrastructure costs rise, IBM Z delivers a 2 to 15x total cost of ownership advantage versus off-platform alternatives.”
Krishna contended that businesses need good data, secure systems and flexible cloud services to make AI useful. He vouched for IBM real-time data tools offering AI-powered software development, task automation, cost control, and cloud computing to help companies use AI across their operations.
IBM’s July Rout Driven By AI Hardware Demand
On July 14, IBM shares fell more than 25% in a day, marking their biggest single-day drop in over 50 years. The sell-off followed a surprise update ahead of its Q2 earnings, in which Krishna said results were “worse than our expectations.” IBM reported preliminary revenue of $17.2 billion and adjusted earnings of $2.93 per share, missing Street estimates. The disappointing update raised concerns across the enterprise technology sector.
The rout came as companies unexpectedly shifted IT spending away from IBM’s software and consulting services toward hardware, memory chips, and servers because of AI-driven supply shortages. As a result, IBM’s Infrastructure division revenue fell 7% in Q2. Krishna admitted that the company did not respond quickly enough to rising chip costs and changing customer demand.
The stock has recovered and is up 16% since the sharp decline.
IBM Stock: Retail Stance
On Stocktwits, retail sentiment around the stock improved to ‘extremely bullish’ from ‘bullish’. Message volume surged 1,600% over the past week, with watchers up 0.1%.
A user said, “Bought at $240 just now. $255 tomorrow would be reasonable, based off their ER.”
Another user said, “Buy Buy Buy – Everything is positive – so I am sure tomorrow we will go up 10X.”
IBM stock has declined 15% year-to-date.
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