IBM's senior leadership team has sought to reassure investors during the company's Q2 2026 earnings call after its IBM Z mainframe offering saw a disappointing quarter.

The company had revenue of $17.2 billion for the quarter, representing a Year-on-Year (YoY) growth of just 1 percent, lower than analyst expectations and company's own previous predictions.

The poor revenue growth was not a surprise, as IBM decided to release preliminary financial results to address the "performance shortfall" earlier this month.

Notably, the segment that suffered most was IBM Z, the company's mainframe offering. Falling under infrastructure - for which revenue was $3.8bn, down seven percent overall- IBM Z specifically saw revenue slowing by 42 percent.

When asked by analysts whether this was indicative of revenue being 'deferred' or 'destroyed,' CEO Arvind Krishna said that the company is currently getting indications that it will merely be a deferral.

The issues were discussed in further detail than was shared in the preliminary results, with CEO Krishna stating in his opening remarks that the issue was not with the company's portfolio, but with its "execution" of the deals.

He said: "We have engaged with clients on the transactions that slipped and have a clear understanding of what needs to change. We are adapting to deliver greater business value to clients around our innovation and greater economic value to better align with client priorities."

CFO Jim Kavanugh put the "tens of large deals" that failed to close "on the timelines we expected" down to a customer shift in spending.

"Many clients redirected spending towards servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. As a result, tens of large deals failed to close on the timelines we expected, accounting for the majority of the shortfall."

This then leaks into the software revenue as well, as "many clients purchase mainframe and the associated software stack through our enterprise license agreements," and are treated as capex investments, covering transaction processing - down nine percent, automation - up three percent, and data - up 18 percent.

"In contrast, we continue to see strong underlying demand in our subscription and consumption-based software. Because these are generally purchased as operating expenditures, they were largely unaffected by the capex dynamics that impacted some of our ELA transactions during the quarter."

While Z took a blow, the company was keen to emphasize its strengths, with Krishna noting that its performance across the five quarters since it launched was still at 130 percent program to program compared to the previous generation.

In practice, this translates to significant revenue growth, with Kavanaugh noting that for every dollar secured for mainframe, $3 is linked to software.

"Look at the historical seasonality of mainframe; it is always down in the 5th quarter as we wrap around the launch. With that said, I think we were very open and transparent. It was below our expectations. With that said, let me put this in perspective. One, we are still at nearly 130 percent, the record across the history of IBM of a program-to-program. Put that in dollar figures. From our most successful program, z16, to now z17, five quarters in, we are at nearly 130 percent. That is $1 billion more of mainframe revenue. That is $3+ billion more of software stack on top of that, versus where we were at a similar point in time in the Z16 cycle."

The two said they see "no evidence of clients moving off the mainframe," and of those large deals that failed to close in Q2, around a third have since closed and IBM would typically expect to secure between two-thirds and three-quarters of them in the next six months.

"The fact that a third have already closed in the first three weeks gives us an indication, not yet full evidence, but a good indication, that this was deferral and not destruction," he concludes.

Other key metrics for the quarter include a gross profit of $9.9bn, down one percent YoY with a margin of 57.7 percent, also down one point. The company ended the quarter with $8.2bn in cash, restricted cash, and marketable securities.

Following IBM's release of its preliminary earnings earlier this month, its share value suddenly dropped from $290.23 to $217.07. Following the earnings call, shares are sitting at $205.77.