IBM stock falls 9% after 42% drop in Q2 mainframe sales; cautious buy at fair value

IBM's stock declined 9% following a sharp 42% drop in mainframe sales in Q2 2026, causing investor concern. Despite this, the stock appears fairly valued rather than a bargain. IBM's growth now relies heavily on its software segment, which makes up 45% of revenue and is 80% recurring, with Red Hat and automation offering strong expansion potential. However, risks remain from high acquisition costs, execution challenges, and rising debt, warranting careful monitoring of future cash flow and returns.