Key Takeaways:
IBM shares plunged 25.2% on July 14, wiping out about $67 billion in market value after the company disclosed preliminary second-quarter results that fell short of Wall Street estimates.
"This quarter we faltered," Chief Executive Officer Arvind Krishna said in a letter to investors, adding that the company "did not move quickly enough" to adapt to a shift in customer spending toward AI infrastructure.
Revenue came in at $17.2 billion, up 1% from a year earlier and about $660 million below the LSEG consensus of $17.86 billion. Adjusted earnings of $2.93 a share missed the $3.02 estimate. Software growth slowed to 5%, consulting revenue was flat, and infrastructure fell 7%. Distributed infrastructure revenue jumped 37%, but that strength was offset by weakness in mainframe-related deals that slipped beyond the quarter.
The selloff marked IBM's worst single-day decline on record, surpassing even the Black Monday crash of 1987. The stock closed at $212.67 on July 17, giving the company a market capitalization of roughly $202.5 billion. Oppenheimer downgraded the stock to Perform from Outperform and abandoned its $350 price target, citing the miss across every segment.
Krishna said clients spent the final weeks of June rushing to secure supply-constrained servers, storage and memory ahead of expected price increases driven by AI demand. Red Hat revenue growth accelerated to 11%, and the company's generative AI book of business reached $12.5 billion. But those bright spots were not enough to offset the broader shortfall.
The decline puts IBM at its lowest valuation in years, with shares trading at about 18 times trailing earnings — a discount to the sector median of 26 times. Investors will watch the full earnings report on July 22 for updated guidance and clarity on whether the spending disruption was a one-quarter timing issue or a more permanent shift in enterprise technology budgets.
This article is for informational purposes only and does not constitute investment advice.
