IBM's stock has fallen since July 14 after an earnings miss, but CEO Arvind Krishna says delayed deals are resuming faster than expected.
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IBM CEO says 80% of delayed deals to close after earnings miss
IBM reported $4.8 billion in free cash flow in the first half of 2026, yet its stock has fallen since July 14 after warning that customers delayed "low tens" of large deals.
"About a third of those deals closed within the first three weeks of the current quarter, much faster than typical," Krishna, IBM's chief executive, said in an interview with The Wall Street Journal.
The company expects 80% of the delayed deals to close within six months, Krishna said. IBM employs close to 300,000 people, with about 160,000 in its services business. Hardware sales account for about 20% of revenue, with mainframes representing about a quarter of that.
The selloff reflects investor concern that the AI boom is diverting corporate IT budgets away from IBM's core mainframe and services business. But Krishna argues the disruption is temporary and that IBM's role as infrastructure for the global financial system — 70% of transactions by value flow through its mainframes daily — makes it indispensable.
Mainframe Dominance and the AI Spending Shift
IBM has manufactured mainframes since 1964 and still designs its own processors, including the Power architecture and the Telum II chip powering its latest mainframes. For every dollar a customer spends on mainframes, they typically spend an additional $3 to $4 across IBM, Krishna said. The company also prepurchased $600 million in hardware to get ahead of price increases driven by AI-related supply chain shifts.
The stock decline came as customers redirected IT budgets toward memory and storage chips, both of which have surged in price as the silicon supply chain reorients to AI infrastructure. Some analysts believe IBM may miss even its more modest revenue targets for the rest of the year, according to the Journal report.
Quantum Computing and the Long View
Krishna is betting IBM's future on quantum computing, projecting the company will offer the world's first truly useful quantum computer by 2029. In June, the Trump administration committed $1 billion to help IBM set up a quantum-chip manufacturing facility. The company also announced Thursday it will acquire HRL Laboratories, adding complementary research on qubits, the fundamental units of quantum computing.
Krishna said he has raised his estimate of the total opportunity for quantum computing, calling it a "trillion-dollar value-adder by the end of the '30s." IBM has also invested $5 billion into Lightwell, a project using AI to find and fix vulnerabilities in open-source software.
The selloff puts IBM's stock at its lowest levels since the broader tech rout described as the biggest since Black Monday. Unlike Alphabet and Oracle, which are reporting negative cash flow as they spend heavily on AI, IBM remains cash-flow positive — a divergence that could attract value-oriented investors if the company delivers on its deal-closure forecast. Investors will watch the next quarterly report for evidence that the delayed deals have closed as Krishna expects.
This article is for informational purposes only and does not constitute investment advice.
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