International Business Machines (IBM) saw its stock tumble 23% on Tuesday, marking its steepest single-day decline since October 19, 1987, when shares fell 23.7%. The selloff came after the tech giant released preliminary second-quarter results that missed Wall Street’s estimates on both earnings and revenue.
According to FactSet data, IBM reported adjusted earnings of $2.93 per share on revenue of $17.2 billion, falling short of analysts’ projections of $3.01 per share and $17.86 billion in revenue.
In a letter to investors, CEO Arvind Krishna attributed the shortfall to unexpected weakness in the company’s software and infrastructure segments, pointing to a last-minute shift in client spending toward hardware—particularly memory chips, servers, and storage—as businesses rushed to secure supply-constrained equipment ahead of anticipated price hikes.
“While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization,” Krishna wrote. 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.”
The disappointing results stand in stark contrast to IBM’s first-quarter performance, when software revenue grew 11% to $7.05 billion, helping the company beat expectations with adjusted earnings of $1.91 per share versus the $1.81 forecast. Revenue in Q1 also topped estimates, coming in at $15.92 billion against a projected $15.62 billion.
Tuesday’s dramatic slide comes amid mounting investor anxiety over the rapid growth of artificial intelligence tools and their potential to disrupt established software giants. While AI-driven demand has fueled a surge in hardware spending—boosting memory names like Micron and SK Hynix as workloads for running and processing AI models skyrocket—IBM appears to have been caught off guard by the speed of that shift, with the company struggling to close deals in a rapidly evolving market.
All eyes will now be on IBM’s full earnings call and any guidance updates as the company works to reassure investors and regain footing in an increasingly AI-centric tech landscape.
