By Maham Fatima
Publication Date: 2026-10-09 13:29:00
Two halves of the same company just moved in opposite directions. International Business Machines (NYSE:IBM) saw its IBM Z mainframe line fall 42% in fiscal Q2 2026, while distributed infrastructure, which covers Power and Storage, jumped 37%. Total revenue rose only 1% to $17.2 billion, and management updated its full-year outlook to 4% to 5% constant-currency growth.
IBM sells software (Red Hat, data tools, automation), consulting, and the infrastructure that runs big companies’ systems. Software is its highest-margin segment, with a 32.2% segment profit margin. Whether the miss is a pothole or a warning depends less on the mainframe number than on what software does next, and on whether 18 times earnings already reflects it.
Margins Tell the Story
The moat shows up in the economics rather than the marketing. Software carried an 82.6% gross margin in…