Quick overview

---

One of the factors weighing on shares and ADRs of IBM was the lack of an upgrade to its full-year guidance.

Shares and ADRs of IBM plunged on Thursday following the release of its earnings results. The negative trend continued into Friday, with the stock remaining under pressure.

During Thursday’s session, IBM shares fell as much as 10% in before trimming losses to close down 7.7%, despite reporting better-than-expected quarterly results. The market reaction reflected a key concern that the numbers failed to dispel: the impact of artificial intelligence on its legacy business.

In the first quarter of 2026, IBM posted revenue of $15.92 billion, up roughly 9%, and adjusted earnings of $1.91 per share, beating Wall Street estimates. However, these positive figures were not enough to support the stock.

Concerns over the software business

The main source of concern was the software division, which did grow, but at a slower-than-expected pace.

This segment—covering hybrid cloud solutions and AI tools such as Watsonx—is central to the company’s future. The slowdown raised questions about IBM’s ability to compete in an environment increasingly dominated by artificial intelligence.

Investors are also wary that new AI tools could replace or reduce demand for certain traditional services, particularly in areas such as system modernization and process automation.

AI: opportunity and threat

The market is also assessing whether IBM can capture meaningful value from the AI boom. While the company is investing heavily in the space, doubts remain as to whether these initiatives will translate into sustained growth.

One example fueling these concerns is the emergence of AI solutions capable of modernizing legacy languages such as COBOL, historically tied to IBM’s ecosystem. This could erode part of its competitive advantage.

Another factor weighing on IBM shares was the lack of improved full-year guidance. The company maintained its outlook (more than 5% revenue growth and higher free cash flow), but investors were expecting more upbeat signals.