⚠ A Flat Line Can Only ErodeLow threat

IBM (IBM) — threat to the moat

Support fees can only follow the installed base, and the base has been shrinking slowly for four years.

Infrastructure Support has one direction available to it over time, and it is down. It was $6,021 million in 2021 and $5,100 million in 202512. The line grows only when new machines join the base faster than old ones leave, and the evidence of the last four years is that they have not.

Infrastructure segment gross margin (%)55.8%202458.6%2025IBM 2025 Annual Report
The margin rose with z17, not with support.

Pricing can slow the decline but not reverse it. The fee on an old machine is set against the cost of replacing it; push too hard and the client buys new hardware, perhaps from someone else. IBM's filing names Dell Technologies, Hewlett-Packard Enterprise, Intel, NetApp and Pure Storage as its principal infrastructure competitors3.

The gross margin of the whole segment shows the trade-off. Infrastructure earned a 58.6% gross margin in 2025 against 55.8% in 20244, helped by z17 sales, not by support prices.

The support business also depends on what clients do with older machines. IBM's filing notes that its infrastructure competitors include "original device manufacturers (ODMs) who provide systems that are re-branded"5, a market where maintenance is often bought from third parties. For the mainframe there is no such market, which is why the support decline has been slow. For Power and Storage the competition for support work is broader, and the fees are easier to negotiate down.

This is a low threat because the decline is slow. This grows more serious if support fell in the same year that a new mainframe was shipping, since that would mean clients were retiring machines rather than upgrading them; a full-year fall of more than 3% in 2026 would be the signal.

References
  1. ReportedIt was $6,021 million in 2021 and $5,100 million in 2025.
    IBM 2022 Annual Report (Form 10-K exhibit 13) - zSystems growth, incremental sales to Kyndryl, disposal of the retained Kyndryl stake, Red Hat growth, 2021-2022 segment revenue. — FY2022 · publ. February 2023 · source ↗
  2. ReportedIt was $6,021 million in 2021 and $5,100 million in 2025.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - segment note: segment revenue, segment profit, margins and reconciliation to reported revenue. — FY2025 · publ. 24 February 2026 · source ↗
  3. ReportedIBM's filing names Dell Technologies, Hewlett-Packard Enterprise, Intel, NetApp and Pure Storage as its principal infrastructure competitors.
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
  4. ReportedInfrastructure earned a 58.6% gross margin in 2025 against 55.8% in 2024, helped by z17 sales, not by support prices.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Infrastructure and Financing segments: IBM Z, Hybrid Infrastructure and support. — FY2025 · publ. 24 February 2026 · source ↗
  5. ReportedIBM's filing notes that its infrastructure competitors include "original device manufacturers (ODMs) who provide systems that are re-branded", a market where maintenance is often bought from third parties.
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
Sources
Generated September 28, 2026