IBM disappointed despite solid results: AI is beginning to threaten the core of the business $IBM
IBM’s results for the first quarter of 2026 didn’t look bad at first glance. The company beat analysts’ expectations on both revenue and earnings — revenue rose by about 9% to $15.9 billion and earnings per share reached $1.91. Yet the stock plunged. And it’s precisely this market reaction that is the most interesting part of the whole story.
The main problem doesn’t lie in the numbers themselves, but in their quality and the outlook for the future. Growth exists, but it’s slowing, especially in the key software segment that is crucial for IBM. Software did grow year over year, but the pace is no longer as strong as in previous quarters, which immediately raised questions about whether the company can keep up in the AI era.
At the same time, it appears that consulting may be the biggest weakness. This segment is growing very slowly, yet it’s precisely here that IBM has a large part of its AI business. If AI tools become more efficient and automate work that companies currently outsource, it could fundamentally disrupt IBM’s entire business model.
And here we come to the main reason for the sell-off. Investors are increasingly worried that AI will not be just an opportunity for IBM but also a threat. New tools — for example from Anthropic — can automate tasks that IBM has historically profited from, especially in modernizing legacy systems. In other words, what used to be complex and expensive may become cheaper and more accessible thanks to AI, which puts pressure on margins.
The paradox is that not everything is negative. The infrastructure segment, especially mainframes, grew very strongly and shows that demand for computing power remains robust. Moreover, IBM’s own AI products, like Watsonx, are generating solid demand. So the problem isn’t that IBM isn’t in AI — the problem is that the market is unsure whether it will profit from it quickly and efficiently enough.
The whole story thus reflects a broader trend in the technology sector. AI is beginning to create clear winners and losers. While companies focused on chips and infrastructure are growing, traditional software and consulting are starting to come under pressure. IBM currently sits somewhere in the middle — and it is this uncertainty that explains why the stock falls despite “good” results.
From an investment perspective, IBM looks like a transitional story. The company has strong fundamentals, stable cash flow and a growing AI portfolio, but it also faces a real risk that part of its historical business will be gradually disrupted by AI. It will therefore be key to watch whether it can manage this transition faster than AI begins to take its market share.
And you? Do you see IBM more as an undervalued AI player, or as a company that will be gradually disrupted by AI?
I’ll admit I don’t know. I never followed this company and it flew under my radar. Only recently, when I was looking into companies around quantum technology — or rather those involved in some kind of research — this firm popped up for me.
It’s true that AI is a major shift now: progress that companies will either keep up with, build businesses on, or that will push them out of the game. So far I haven’t heard of IBM in connection with AI, so I understand the drop. But it’s not the end of the story yet — maybe they’ll come up with something.