IBM has released selected preliminary Q2 2026 financial results as part of a letter from its CEO, Arvind Krishna, to investors.The letter, Krishna states, is to enable the company to "spend some time explaining what we experienced in the quarter that led to the Software and Infrastructure performance shortfall."Following publication of the letter, IBM shares dropped by around 23 percent.The preliminary results suggest a quarterly revenue of $17.2 billion, up 1 percent Year-on-Year (YoY), up from the previous quarter's $15.9bn. Within that, infrastructure revenue is down 7 percent.Q2 is expected to show a GAAP gross profit margin of 57.7 percent, down 100 basis points, and an operating margin of 59.4 percent, down 70 basis points.The company is also reporting a free cash flow of $4.8bn.Elaborating on the "shortfall," Krishna noted that while the company was expecting infrastructure revenue to be down in the low-single digits for this quarter, "what played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing."He continued: "In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns. While we anticipated some supply chain-related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization."He added: "These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall."In the previous earnings call held in April 2026, Krishna told investors that it expected the supply chain issues to have a "de minimis impact on us overall.""Will it impact storage and potentially some components of our distributed infrastructure? Absolutely. But look underneath it... we've been in existence for 115, 116 years overall. We know how to run global supply chains. We drive supplier optimization, supply chain diversification, and procurement strategies, and I think we've been able to mitigate this dislocation overall."In his letter, Krishna was keen to reemphasize areas of strength, including that its Red Hat revenue growth accelerated to 11 percent, and that distributed infrastructure saw its best performance in the company's reported history, up 37 percent with strong growth in Power and Storage, and a backlog of approximately $500 million exiting the quarter.He concluded: "While performance in the quarter was below our expectations, we have conviction in the strength of our portfolio and the strategic transformation of our business. To remedy challenges this quarter, we are undertaking new initiatives and accelerating others, all to improve our results going forward."The company will hold its full earnings call on July 22, 2026.