IBM Reports Oct. 21. Should You Buy the Stock 29% Below Its June Record?

As of October 21, IBM's stock is trading at $234, a 29% decrease from its June record high of $329.23. The company is set to release its third-quarter results on that day. IBM's software segment, its largest by revenue and profit, generated $7.8 billion in second-quarter sales, with profits up 9% year over year to $2.5 billion. However, software revenue growth slowed significantly from 14% in Q4 2025 to just 5% in Q2 2026.

CFO James Kavanaugh attributed this slowdown to customers shifting budgets to hardware due to expected price hikes and delays in closing large deals. Red Hat, IBM's hybrid cloud business, grew 11% and data software grew 19% in the second quarter. CEO Arvind Krishna expects software revenue growth to be between 6% and 8% this year in constant currency, with a potential 10% if recent spending patterns continue.

IBM anticipates third-quarter revenue growth in line with its full-year range of 4% to 5%, a significant improvement from the 1% growth in Q2. The stock yields around 2.9% and trades at about 18 times expected 2027 earnings. A rise in software growth toward the high single digits upon the release of the quarterly report might indicate a recovery, while a continued slowdown could suggest the stock is a buy at its current price.