Japan IT Services: IBM‘s earnings pre-announce - component price surge now materializing in software investment, too

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Japan IT Services: IBM‘s earnings pre-announce - component price surge now materializing in software investment, too

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14 Jul 2026 10:40:19 ET │ 8 pages

Japan IT Services

IBM's earnings pre-announce - component price surge now

materializing in software investment, too

CITI'S TAKE

Around 20:00 Japan time on July 14, IBM released provisional results, in

an unusual move for the company. Revenue came in at $17.2bn, below

consensus of $17.9bn, and the share price is down 24%. The shortfall Moriya KoketsuAC

resulted from customers prioritizing IT budgets for servers, storage, and +81-3-6776-8304

memory procurement amid continued supply-demand tightness and price moriya.koketsu@citi.com

increases, causing shifts in the timing of software investments. While the Masahiro Shibano

market has partially priced in such concerns and NEC has already +81-3-6776-4641

reflected them in guidance, the implications for Japanese IT services masahiro.shibano@citi.com

companies are negative as component costs and supply constraints now

seem to be impacting software investment. However, the recent BoJ

Tankan shows domestic corporate software investment plans remain

strong, and we view the impact in Japan as relatively limited compared to

overseas.

Implications — IBM's pre-announcement will likely be perceived as negative for the

sector overall. Previously, concerns primarily focused on how far rising component

prices and procurement difficulties would pressure the profitability of the hardware

businesses of NEC and Fujitsu. However, it now appears that software investment is

decelerating as budget allocations increase for hardware, suggesting the impact

may spread across the entire sector. However, the June Bank of Japan Tankan survey