Investing.com -- Oppenheimer downgraded IBM to Perform and removed its $350 price target on the stock in a note on Wednesday after the company negatively pre-announced second-quarter 2026 results ahead of its July 22 earnings call.

Analyst Param Singh highlighted that IBM's results missed Oppenheimer and consensus estimates across every segment, with total revenue now set at 1% year-over-year growth to $17.2 billion.

Management attributed the shortfall to weakness in Transaction Processing software, a shift in buying behavior toward servers and storage tied to memory cost pressures, and large deal slippage at quarter-end.

Software revenue grew 5% year-over-year in the quarter, well short of Oppenheimer's 12% estimate. The firm said IBM attributed the miss to the mainframe-associated software stack and deals slipping past quarter-end, "not lost," partially offset by RedHat accelerating to 11% sequential growth and continued strength in HashiCorp and Confluent.

Infrastructure revenue fell 7% year-over-year, worse than Oppenheimer's estimate of a 5% decline, as strength in distributed infrastructure was insufficient to offset mainframe weakness. Consulting revenue was flat year-over-year, slightly below Oppenheimer's estimate of 1% growth.

Oppenheimer believes it will be "difficult for IBM to get 'double-digit' CC growth in software for CY26/27 without additional large acquisitions or a material catch-up in large deals."

“The bull thesis will take longer to materialize, and we anticipate the stock will be range bound near term,” wrote Singh.

Oppenheimer added that the spending shift toward hardware should benefit server and storage providers, while flagging near-term risk to infrastructure software vendors from similar IT budget compression.