Eighty-Five Percent of the Capacity StayedWide moat

IBM (IBM) — moat facet

IBM says clients holding 85% of mainframe capacity are keeping or growing it, which is the whole moat in one number.

The mainframe moat is measured in capacity, not units. IBM reported in July 2026 that clients representing 85% of installed MIPS, the unit of mainframe processing capacity, were "maintaining or growing capacity"1. It also said z17 remained at "nearly 130 percent program-to-program" against z162.

Mainframe base indicators, Q2 2026 (%)Installed MIPS kept or grown85%z17 against z16, program to dateabout 130%IBM letter to investors, 14 July 2026
The base held while the quarter fell.

Those two figures are the case for the franchise. The clients who run the most capacity are the ones most locked in: their core ledgers, payment switches and reservation systems were written for the platform over decades. IBM describes its own offering as purpose-built to deliver "unmatched throughput, availability, and security"3; whatever the adjective is worth, the capacity figure shows clients paying for it.

Their loyalty shows in the software as well as the hardware. Transaction Processing revenue rose 9.0% in 20244, a year in which IBM Z hardware revenue fell 10.0%5; IBM attributed the growth to "clients' growing capacity demands" and "solid renewal rates"6.

The 85% figure has one limitation. It is IBM's own disclosure, given in the letter that explained a disappointing quarter, and it is not repeated in the audited annual report. It measures what clients are doing, not what they will do at the next renewal.

IBM's statement that z17 is running at "nearly 130 percent program-to-program"7 is the other half of the argument. Measured from launch, the new machine has been bought faster than z16, which IBM called "our strongest program on record"8. Clients that were going to upgrade have largely done so already. The second quarter's fall is partly the result of that speed: the more capacity clients bought early, the less was left to buy in the second year.

The test is whether that figure is repeated. If IBM stops disclosing it, or it falls well below 85%, the core of the base would be shrinking, and the rest of the franchise would follow.

Moat trajectory: Holding steady

85% of installed MIPS maintaining or growing (Q2 2026).

The number that tests this moat
Reported
Share of installed MIPS maintaining or growing capacity
85% (Q2 2026)

The core of the mainframe base; a figure well below 85% would mean the largest clients are shrinking their footprint.

Source: IBM letter to investors, 14 July 2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
Fifteen Percent Is Not Growing
If 85% of mainframe capacity is holding, 15% is not, and IBM does not say how fast it is leaving.
References
  1. ReportedIBM reported in July 2026 that clients representing 85% of installed MIPS, the unit of mainframe processing capacity, were "maintaining or growing capacity".
    Arvind Krishna's letter to IBM investors with preliminary second-quarter 2026 results, Form 8-K exhibit 99.1. — Q2 2026 · publ. 14 July 2026 · source ↗
  2. ReportedIt also said z17 remained at "nearly 130 percent program-to-program" against z16.
    Arvind Krishna's letter to IBM investors with preliminary second-quarter 2026 results, Form 8-K exhibit 99.1. — Q2 2026 · publ. 14 July 2026 · source ↗
  3. ReportedIBM describes its own offering as purpose-built to deliver "unmatched throughput, availability, and security"; whatever the adjective is worth, the capacity figure shows clients paying for it.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - geographic revenue and major clients. — FY2025 · publ. 24 February 2026 · source ↗
  4. ReportedTransaction Processing revenue rose 9.0% in 2024, a year in which IBM Z hardware revenue fell 10.0%; IBM attributed the growth to "clients' growing capacity demands" and "solid renewal rates".
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Software segment: Hybrid Cloud, Automation, Data, Transaction Processing and ARR. — FY2025 · publ. 24 February 2026 · source ↗
  5. ReportedTransaction Processing revenue rose 9.0% in 2024, a year in which IBM Z hardware revenue fell 10.0%; IBM attributed the growth to "clients' growing capacity demands" and "solid renewal rates".
    IBM 2024 Annual Report (Form 10-K exhibit) - January 2024 segment changes, 2022-2024 segment profit, pension risk transfers and settlement charges. — FY2024 · publ. 25 February 2025 · source ↗
  6. ReportedTransaction Processing revenue rose 9.0% in 2024, a year in which IBM Z hardware revenue fell 10.0%; IBM attributed the growth to "clients' growing capacity demands" and "solid renewal rates".
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Software segment: Hybrid Cloud, Automation, Data, Transaction Processing and ARR. — FY2025 · publ. 24 February 2026 · source ↗
  7. ReportedIBM's statement that z17 is running at "nearly 130 percent program-to-program" is the other half of the argument.
    Arvind Krishna's letter to IBM investors with preliminary second-quarter 2026 results, Form 8-K exhibit 99.1. — Q2 2026 · publ. 14 July 2026 · source ↗
  8. ReportedMeasured from launch, the new machine has been bought faster than z16, which IBM called "our strongest program on record".
    Arvind Krishna's letter to IBM investors with preliminary second-quarter 2026 results, Form 8-K exhibit 99.1. — Q2 2026 · publ. 14 July 2026 · source ↗
Sources
Generated September 28, 2026