IBM shares are trading around $234, just two days before the company is scheduled to post its third-quarter results on Wednesday, October 21.
The stock has shed approximately 21% of its value so far in 2026, sitting well below the all-time closing high of $329.23 it reached on June 2.
With shares this far removed from their peak and a dividend yield approaching 3%, investors are weighing whether now is a smart time to buy.
Software is IBM’s largest segment by both revenue and profit, generating $7.8 billion in second-quarter sales alone.
Segment profit climbed 9% year over year to $2.5 billion, but the headline story was a sharp deceleration in revenue growth over two consecutive quarters.
Software revenue grew 14% year over year in the fourth quarter of 2025, then slowed to 11% in the first quarter of 2026, before dropping to just 5% in the second quarter.
Management pointed to timing issues, with many customers shifting budgets toward hardware in the final weeks of June to lock in supply ahead of anticipated price increases.
“Tens of large deals failed to close on the timelines we expected,” said IBM’s CFO on the company’s July 22 analyst call, helping to explain the disappointing software performance.
Transaction processing software, which is closely tied to IBM’s mainframe business, was hit hardest and slid 8% during the quarter.
There were genuine bright spots, however, as Red Hat, IBM’s hybrid cloud platform, grew 11% and data software expanded 19% during the same period.
CEO Arvind Krishna noted that around a third of the delayed deals had already closed within the first three weeks of the third quarter, offering some reassurance to investors.
Still, a quarter with virtually no organic software growth is difficult to dismiss, given how central that segment is to IBM’s broader growth narrative.
IBM has guided for software revenue growth of 6% to 8% this year on a constant currency basis, setting a clear benchmark for Wednesday’s report.
Approximately 80% of IBM’s software revenue comes from recurring subscription and consumption-based sources, a mix that provides some stability even when large deal closures slip.
IBM’s CFO noted that recurring revenue rose 7% in the first quarter and accelerated to 8% in the second, with the company’s optimistic scenario calling for roughly 10% growth in the second half of the year.
Investors will be watching closely to see whether third-quarter results confirm that software momentum is recovering, or whether the slowdown is proving more persistent than management suggested in July.
