Shares of International Business Machines (IBM Quick QuoteIBM - Free Report) dropped about 7% in extended trading on April 22, 2026, even though the company delivered stronger-than-expected first-quarter results. The decline came after the hardware, software, and consulting giant maintained its full-year guidance, signaling a cautious stance despite solid Q1 performance.

Inside the Headline

IBM outperformed consensus estimates on both earnings and revenues. Adjusted EPS came in at $1.91, ahead of Zacks Consensus expectations of $1.81. Revenue reached $15.92 billion, topping the $15.68 billion of estimate.

Revenue grew 9% year over year. Net income rose to $1.22 billion ($1.28 per share), up from $1.06 billion ($1.12 per share) in the prior quarter. Adjusted earnings excluded acquisition-related costs.

Software revenue climbed 11% year over year to $7.05 billion, slightly ahead of expectations, as quoted on CNBC. Consulting revenue rose 4% to $5.27 billion but came in just below analyst expectations.Infrastructure revenue jumped 15% to $3.33 billion, beating estimates.

Growth from Red Hat Enterprise Linux—a key driver following IBM’s Red Hat acquisition—slowed compared to the previous quarter. Executives attributed this to weaker federal deal activity and supply chain disruptions affecting hardware deployments.

No Adverse Impact of War on Middle East Business

Meanwhile, despite geopolitical tensions following the Iran–United States conflict escalation in 2026, the company reported no material adverse impact in the first quarter in its Middle East business. CEO Arvind Krishna highlighted strong performance in the Middle East, where IBM saw some of its fastest growth in decades, as quoted on CNBC.

Guidance Reflects Conservative Approach

Management reiterated its 2026 outlook, projecting over 5% revenue growth at constant currency and a $1 billion increase in free cash flow, as quoted on CNBC.

CFO Jim Kavanaugh emphasized a disciplined approach, noting that the company typically avoids raising guidance in the first quarter and aims to remain “a prudent operator,” as mentioned in the same CNBC article.

Is AI a Threat to IBM Mainframes?

IBM’s stock had earlier faced pressure after comments from Anthropic suggested AI could help modernize legacy COBOL code – traditionally run on IBM mainframes.

However, IBM pushed back on that narrative, arguing that AI enhances, rather than diminishes, the value of its mainframe ecosystem.

IBM Stock Performance

IBM shares were down about 13% in 2026, underperforming the broader S&P 500, which has gained roughly 4% over the same period. The faster emergence of Anthropic AI is probably viewed as a threat.

Why You Can Buy the Dip

FedRAMP Boost Strengthens Government Presence

On April 1, IBM announced that 11 of its AI and automation solutions received FedRAMP authorization. These solutions are deployed on AWS GovCloud, enabling secure and compliant use for government agencies. This move expands IBM’s presence in federal and highly regulated markets.

New Cybersecurity Push Against AI Threats

IBM has also introduced new cybersecurity initiatives to tackle emerging “agentic” AI-driven attacks. These include a cybersecurity assessment offering and IBM Autonomous Security – a multi-agent system designed to deliver fast threat detection and response. With these additions, IBM aims to help enterprises and governments deploy AI safely while improving resilience against cyber threats.

ETFs in Focus

Overall, growth is being supported by innovation, strategic partnerships, and increasing adoption of its platforms across both government and commercial sectors.

Against this backdrop, investors can tap IBM-heavy ETFs like First Trust NASDAQ Technology Dividend Index Fund (TDIV Quick QuoteTDIV - Free Report) , FT Vest Technology Dividend Target Income ETF (TDVI Quick QuoteTDVI - Free Report) , and Invesco Dow Jones Industrial Average Dividend ETF (DJD Quick QuoteDJD - Free Report) . A basket approach minimizes the company-specific concentration risks.