Traditional tech giants IBM and ServiceNow faced significant after-hours stock drops following their Q1 2026 earnings reports on Wednesday, April 22, 2026, despite both companies beating top-line revenue expectations. The market's reaction highlights growing investor skepticism and a demand for clear upside surprises amidst macroeconomic and geopolitical uncertainties.
IBM (IBM) reported adjusted earnings per share (EPS) of $1.91, surpassing the consensus estimate of $1.81, while revenue reached $15.92 billion against a forecast of $15.62 billion, marking a 9% year-over-year increase. Net income rose to $1.22 billion from $1.06 billion in Q4 2025. Despite these beats, IBM's stock plummeted nearly 7% in after-hours trading, largely because the company maintained its full-year guidance without raising the bar. Key growth driver Red Hat saw revenue accelerate to 13% growth, but CFO Jim Kavanaugh flagged a deceleration in its Red Hat Enterprise Linux (RHEL) business. He attributed this to reduced federal government signings following the late-2025 U.S. government shutdown and a disrupted hardware supply chain. IBM’s consulting revenue of $5.27 billion also narrowly missed estimates. The company's stock is down approximately 15% year-to-date, reflecting a broader selloff in software stocks.
ServiceNow (NOW) reported in-line adjusted EPS of $0.97 and a slight revenue beat of $3.77 billion against a $3.75 billion estimate. However, the stock dropped 12% in after-hours trading, driven by the revelation that the ongoing conflict in the Middle East (specifically the Iran war) created a roughly 75 basis-point headwind on subscription revenue growth due to delayed deal closings in the region. CEO Bill McDermott noted that the company's generative AI suite, Now Assist, saw large customers (ACV over $1M) grow by over 130% year-over-year. Raymond James analyst Michael Turtis cut the price target from $160 to $130 but maintained an Outperform rating. ServiceNow guided Q2 subscription revenue of $3.815-$3.82 billion and full-year revenue of $15.7-$15.8 billion, both above consensus estimates, but the guidance miss on specific metrics spurred the sell-off. The stock is now down 45% over the past six months.
