IBM remains unshaken by the ongoing memory shortages, according to CFO James Kavanaugh.

Speaking during the company's Q1 FY2026 earnings call, Kavanaugh told analysts that the company expects the shortages to have a "de minimus impact" on its performance overall.

Memory chip shortages have been ongoing. Demand is expected to continue outstripping supply, with SK Group chairman saying last week that the company is estimating the shortages will continue until 2030, hitting hardware suppliers' abilities to provide the necessary equipment to customers.

Despite this, Kavanaugh notes that while IBM's hardware business is "extremely important as a value creator to IBM," it remains only around "25 percent of our business."

"If you look underneath it, around the supply chain dislocation around commodity cost increases, in particular around memory, it has a de minimis impact on us overall.

"Will it impact storage and potentially some components of our distributed infrastructure? Absolutely. But look underneath it... we've been in existence for 115, 116 years overall. We know how to run global supply chains. We drive supplier optimization, supply chain diversification, and procurement strategies, and I think we've been able to mitigate this dislocation overall."

IBM's infrastructure business saw a revenue of $3.3 billion for the quarter, up 12 percent Year-on-Year (YoY) in constant currency. Within that, IBM Z increased 48 percent, while distributed infrastructure was up 13 percent.

The previous quarter saw the infrastructure segment bring in $5.1bn, up 21 percent, and IBM Z growing by 67 percent.

Speaking on the company's infrastructure performance, CEO Arvind Krishna noted that this was in part due to growing demand for its storage offerings caused by generative AI.

"AI will run everywhere across public cloud, private and sovereign clouds, and on-premise. The core challenge is making all of this work together. This includes orchestrating across models, agents, and workflows, governing enterprise data, and securing these systems at scale. And that is exactly where IBM operates," Krishna said.

Speaking further on the company's confidence in its mainframe business, Krishna noted that the company's latest generation - the z17 - is capable of running "a 20 billion, 30 billion parameter model right on the mainframe," which brings latency down to milliseconds, and for banking customers could "take your fraud rate down from 50 basis points to 40."

"It is effectively a new capacity of the mainframe that previously was either very small but outside the mainframe or running on systems that are what we would call distributed infrastructure. We believe that this is going to play out. We see a large majority of our clients asking for the capacity."

CFO Kavanaugh added that they have, since the launch of the z17, "increased hardware placement value by over $1bn" and expects that to increase three to four times "over time."

Overall revenue for the quarter across all business segments was $15.9bn, up six percent YoY. The previous four months brought in $19.7bn.

Year to date, net cash from operating activities was $5.2bn, and the company had a free cash flow of $2.2bn. This, along with continued growth, led analysts to question why IBM had not chosen to increase its guidance for future performance.

IBM's Kavanaugh noted that in all the time both he and Krishna had been at IBM, the company had never raised guidance in the first quarter, choosing instead to be "prudent" as "we're 90 days into an extremely important year."

Krishna noted that there are some macroeconomic risks at present, notably the Iran War. He said that, despite this, "We had the strongest growth we have seen in decades, not years, decades in the Middle East... There is no signal... I would tell you that I would expect the second quarter to play out similarly to the first quarter in the Middle East," and that performance in Europe was also strong. Despite this, he noted that should the straits remain closed, there could be "energy impacts in Europe, but that is speculative."

"I expect that actually, some of that we'll be able to absorb and maintain our acceleration."

Currently, full-year 2026 expectations are that revenue will grow at around five percent, while free cash flow could increase by about $1bn YoY. 2025's free cash flow was $14.7bn for the full year.

Profit margin for the quarter was 56.2 percent for GAAP, while non-GAAP was 57.7 percent.

During the call, Krishna also touched on the company's quantum computing progress. While no hard numbers were provided, he said that the company remains "on track to deliver the first, large-scale fault-tolerant quantum computer by 2029."

"In March, researchers used IBM Quantum hardware to simulate a 300 atom system with the Cleveland Clinic, demonstrating that quantum computers can serve as reliable tools for pharmaceutical discovery. Another team accurately simulated real magnetic materials. Magnetism is central to new forms of energy and electrification. These are significant demonstrations to date that quantum computers can serve as reliable tools for scientific discovery.

"We also released a new blueprint for Quantum-centric supercomputing that outlines the architecture for integrating quantum and classical systems at scale. We strongly believe that our partners will achieve the first examples of Quantum Advantage this year leveraging IBM hardware."

The lack of data on the quantum business has been standard practice for IBM since it revealed it had booked $1 billion worth of cumulative quantum business in February 2025.