Shares of International Business Machines (IBM Quick QuoteIBM - Free Report) inched up 0.4% on July 23, immediately after its weaker-than-expected second-quarter 2026 results. Despite missing Wall Street estimates on both revenues and earnings, the stock has continued its recovery, gaining 8.7% since the results were reported.

This resilient price action indicates that the sell-off following IBM's mid-July preliminary earnings release had already priced in the worst-case scenario, clearing the way for a relief rally once official numbers were delivered.

Looking ahead, IBM expects to deliver 100 basis points of operating pretax margin expansion, with productivity more than offsetting the revenue-related headwinds. IBM also continues to project that free cash flow will increase approximately $1 billion.

While IBM continues to see strong underlying demand in subscription and consumption-based software, its transactional revenues have been performing poorly owing to the shift in buying patterns. Notably, IBM’s transactional revenues have been declining lately because enterprise clients temporarily shifted capital budgets toward scarce AI hardware, causing delays in high-margin mainframe and transaction-processing software orders.

Amid this backdrop of transactional volatility, investors seeking exposure to IBM’s long-term enterprise AI momentum, without absorbing single-stock earnings risk, may prefer a basket strategy via Exchange-Traded Funds (ETFs) heavily weighted in the tech giant.

But before suggesting those ETFs, let us delve a bit deeper into IBM’s second-quarter results to assess the company’s performance across other metrics.

A Closer Look at IBM’s Q2 Earnings

IBM’s second-quarter adjusted earnings per share (EPS) of $2.93 came in line with the Zacks Consensus Estimate, while its revenues missed the consensus mark by a whisker. 

The company delivered revenue growth of 1%, while its operating margin (pre-tax) expanded 30 basis points (bps). 

Segment-wise, the company delivered solid revenue growth in its software and financing businesses, whereas its infrastructure unit posted a 7% slump in the top line.  Poor performance of its Z application primarily hurt the infrastructure business segment. 

In response to tight infrastructure supply, IBM has been strengthening its supply chain throughout the first half of the year. This proactive move positions the company to meet robust second-half customer demand in its Infrastructure unit.

As of the end of the second quarter, the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year over year.

However, IBM's free cash flow went down $0.3 billion year over year to $2.5 billion. The company returned $3.2 billion to shareholders in the form of dividends through the first half of 2026. 

Looking ahead, IBM expects rapid uptake for its latest AI tools, with almost 50% of z17 clients already adopting the Spyre Accelerator and watsonx Code Assistant for Z users expanding MIPS workload capacity three times faster than their peers.

For its infrastructure business, the company expects revenues to grow by low single digits in 2026, driven by growth in Distributed Infrastructure and continued strong program-to-program performance in IBM Z through the second half of 2026.  

IBM-Heavy ETFs to Watch

Considering IBM’s aforementioned outlook, investors may want to keep the following ETFs on their watchlist and invest when appropriate to gain exposure to IBM while minimizing single-stock concentration risk.

First Trust NASDAQ Technology Dividend Index Fund (TDIV Quick QuoteTDIV - Free Report)  

This fund, with net assets worth $4.18 billion, offers exposure to 94 technology and telecommunications companies that pay a regular or common dividend. IBM holds the fourth position in this ETF, with 6.71% weightage in the fund. 

TDIV has surged 21.8% over the past year. It charges 50 basis points (bps) as fees. 

FT Vest Technology Dividend Target Income ETF (TDVI Quick QuoteTDVI - Free Report)  

This fund, with net assets worth $524 million, seeks to provide investors with current income with a secondary objective of providing capital appreciation. IBM holds the fourth position in this ETF, with 6.70% weightage in the fund. 

TDVI has soared 13.7% over the past year. It charges 75 bps as fees. 

State Street SPDR Portfolio S&P Sector Neutral Dividend ETF (SPDG Quick QuoteSPDG - Free Report)  

This fund, with net assets worth $12.8 million, offers exposure to 275 large, mid, and small-cap companies that have increased or maintained their dividend for seven or more consecutive years. IBM holds the third position in this ETF, with 5.04% weightage in the fund. 

SPDG has gained 19.7% over the past year. It charges 5 bps as fees.