The z17 Cycle: Up 51.7%, Then Down 42%Wide moat

IBM (IBM) — moat facet

IBM Z revenue rises and falls with IBM's own product launches, and the z17 peak made the 2026 trough look like a collapse.

IBM Z revenue does not grow; it cycles. IBM does not publish the dollar figure, only the percentage change, and the percentages tell the story. IBM Z revenue rose 30.6% in 2022 on the z16 launch1, fell 4.5% in 20232 and 10.0% in 20243, then rose 51.7% in 2025 on z17, which shipped from June 20254. It rose 67% in the fourth quarter of 20255 and 51% in the first quarter of 20266.

IBM Z revenue growth by year (%)-4.9%2021+30.6%2022-4.5%2023-10.0%2024+51.7%2025-19.5%H1 2026IBM Annual Reports 2021-2025, Form 10-Q Q2 2026; magnitudes, signs in labels
Two launches, two waves, two troughs.

Then the wave broke. In the second quarter of 2026 IBM Z revenue fell 42.0%, and 19.5% for the first half7. Hybrid Infrastructure, which holds IBM Z and the Power and Storage lines, fell 10.3% to $2,570 million in the quarter8.

IBM expected a decline; it did not expect this one. Krishna wrote in July that the company had expected Infrastructure "to decline low-single digits for the year, beginning this quarter" and that the result "was worse than our expectations"9. He also described z17 as "the strongest start to a mainframe program in our history"10. Both statements are true at once: the higher the peak, the steeper the comparison a year later.

The cycle is a feature of the moat, not a flaw in it. Clients do not leave between launches; they wait. The installed base buys in bursts, and IBM's revenue and share price move with the bursts.

The same pattern appeared on the previous launch. IBM Z revenue rose 30.6% in 2022 on z16, and IBM said incremental sales to Kyndryl contributed about 6 points to Hybrid Infrastructure's growth that year11. The following two years it fell 4.5% and 10.0%1213. A trough of two years after a launch is the norm; the question in 2026 is only how deep this one goes after a peak that was higher than z16's.

What would change the reading is the depth of the trough. On previous cycles the worst full year was a fall of about 10%14; a full-year fall of more than 20% in 2026 would say this wave is ending lower than the last one began.

Moat trajectory: Holding steady

+51.7% in 2025; -42.0% in Q2 2026.

The number that tests this moat
Reported
Hybrid Infrastructure revenue, latest quarter
$2,570M, -10.3% (Q2 2026)

The mainframe and its sister systems; a full-year fall much deeper than past troughs would mean the base is shrinking.

Source: IBM Form 10-Q, Q2 2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
Comparisons Against a 67% Quarter
Every quarter until the next launch is measured against z17's record start, and the market has already shown it will not wait.
References
  1. ReportedIBM Z revenue rose 30.6% in 2022 on the z16 launch, fell 4.5% in 2023 and 10.0% in 2024, then rose 51.7% in 2025 on z17, which shipped from June 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. ReportedIBM Z revenue rose 30.6% in 2022 on the z16 launch, fell 4.5% in 2023 and 10.0% in 2024, then rose 51.7% in 2025 on z17, which shipped from June 2025.
    IBM 2023 Annual Report (Form 10-K exhibit) - Apptio purchase price, 2022-2023 segment pre-tax income, Red Hat growth, total debt. — FY2023 · publ. February 2024 · source ↗
  3. ReportedIBM Z revenue rose 30.6% in 2022 on the z16 launch, fell 4.5% in 2023 and 10.0% in 2024, then rose 51.7% in 2025 on z17, which shipped from June 2025.
    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 ↗
  4. ReportedIBM Z revenue rose 30.6% in 2022 on the z16 launch, fell 4.5% in 2023 and 10.0% in 2024, then rose 51.7% in 2025 on z17, which shipped from June 2025.
    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. ReportedIt rose 67% in the fourth quarter of 2025 and 51% in the first quarter of 2026.
    IBM fourth-quarter and full-year 2025 results release, Form 8-K exhibit 99.1 - IBM Z growth, generative AI book of business and 2026 expectations. — FY2025 · publ. 28 January 2026 · source ↗
  6. ReportedIt rose 67% in the fourth quarter of 2025 and 51% in the first quarter of 2026.
    IBM first-quarter 2026 results release, Form 8-K exhibit 99.1 - IBM Z growth and the 31st consecutive annual dividend increase. — Q1 2026 · publ. 22 April 2026 · source ↗
  7. ReportedIn the second quarter of 2026 IBM Z revenue fell 42.0%, and 19.5% for the first half.
    IBM Form 10-Q for the quarter ended 30 June 2026 - segment results, revenue categories, RPO, the Confluent acquisition and management discussion - Infrastructure and Financing segment results. — Q2 2026 · publ. 23 July 2026 · source ↗
  8. ReportedHybrid Infrastructure, which holds IBM Z and the Power and Storage lines, fell 10.3% to $2,570 million in the quarter.
    IBM Form 10-Q for the quarter ended 30 June 2026 - segment results, revenue categories, RPO, the Confluent acquisition and management discussion - Infrastructure and Financing segment results. — Q2 2026 · publ. 23 July 2026 · source ↗
  9. ReportedKrishna wrote in July that the company had expected Infrastructure "to decline low-single digits for the year, beginning this quarter" and that the result "was worse than our expectations".
    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 ↗
  10. ReportedHe also described z17 as "the strongest start to a mainframe program in our history".
    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 ↗
  11. ReportedIBM Z revenue rose 30.6% in 2022 on z16, and IBM said incremental sales to Kyndryl contributed about 6 points to Hybrid Infrastructure's growth that year.
    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 ↗
  12. ReportedThe following two years it fell 4.5% and 10.0%.
    IBM 2023 Annual Report (Form 10-K exhibit) - Apptio purchase price, 2022-2023 segment pre-tax income, Red Hat growth, total debt. — FY2023 · publ. February 2024 · source ↗
  13. ReportedThe following two years it fell 4.5% and 10.0%.
    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 ↗
  14. ReportedOn previous cycles the worst full year was a fall of about 10%; a full-year fall of more than 20% in 2026 would say this wave is ending lower than the last one began.
    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 ↗
Sources
Generated September 28, 2026