IBM stock dip EXPLAINED: AI-related concerns have rattled technology stocks globally, dragging down shares of companies such as Nvidia, Samsung Electronics and SK Hynix. However, one of the biggest casualties has been IBM.
IBM’s shares plunged more than 25 per cent in the previous session to close at USD 217.07 after the company warned that the rapid adoption of artificial intelligence is putting pressure on enterprise software spending.
The decline in IBM’s stock on July 14 was its steepest one-day fall in more than 38 years.
The company said businesses are increasingly reallocating budgets toward AI investments, squeezing demand for traditional software offerings.
IBM’s Q2 2026 results expectation
On the Q2 results front, according to the company’s preliminary estimates, IBM reported second-quarter 2026 revenue of USD 17.2 billion, up 1 per cent year over year.
While software revenue increased 5 per cent, it missed market expectations. Consulting revenue remained largely flat, while infrastructure revenue declined 7 per cent, marking the quarter’s biggest weakness. GAAP earnings per share fell 2 per cent to USD 2.27, although adjusted operating EPS rose 5 per cent to USD 2.93.
IBM stock price drop reasons
According to IBM’s latest press release, the company’s quarterly performance was mainly pressured by four major factors highlighted in Arvind Krishna’s letter to investors.
1. AI infrastructure spending squeezed software budgets: Enterprise customers redirected IT spending toward AI infrastructure, such as servers, storage and memory, reducing spending on IBM’s mainframe systems and transaction processing software.
2. Capex shifted to secure hardware supply: Toward the end of June, clients accelerated purchases of servers, storage and memory to lock in supply ahead of expected price increases, diverting budgets away from IBM’s software offerings.
3. Cybersecurity concerns delayed spending: Rapidly evolving, industry-wide cybersecurity issues distracted customers and led to delays in IT purchasing decisions during the quarter.
4. Execution missteps hurt deal closures: IBM admitted it failed to adapt quickly enough to changing market conditions, resulting in several large deals not closing on schedule, which accounted for the majority of the quarterly shortfall.
IBM stock performance
Apart from the more than 25 per cent plunge in the previous trading session, IBM’s shares have fallen more than 28 per cent over the past week. However, the stock’s returns remain negative over the one-month to one-year time frames.
The stock is down around 19 per cent over the past month, while the three-month decline stands at around 11 per cent. Over the six-month and one-year periods, the stock has gained around 27 per cent and 23 per cent, respectively.
The stock has been volatile in recent sessions. Between May 20 and June 2, it rose around 49 per cent before declining in 11 out of the following 12 trading sessions, from June 3 to June 18.
Ahead of plunging more than 25 per cent in the previous session, the stock had risen to its highest level since June 3 on July 7.
Positives highlighted by IBM despite the weak Q2
Despite the weak quarterly performance, IBM highlighted several positive developments in its latest press release.
1. Red Hat remained a bright spot: Revenue growth accelerated to 11 per cent, while recent acquisitions, including HashiCorp and Confluent, delivered strong performance.
- HashiCorp: IBM agreed to acquire the company on April 24, 2024, for USD 6.4 billion. The deal received regulatory approval in February 2025, and the acquisition was completed on February 27, 2025.
- Confluent: IBM announced a definitive agreement to acquire the company in December 2025 for about USD 31 per share. The acquisition was completed on March 17, 2026.
2. Distributed Infrastructure posted a record quarter: Revenue surged 37 per cent, driven by robust demand for Power servers and storage, leaving the business with a backlog of about USD 500 million.
3. Strong demand for z17 mainframe: IBM said demand for its z17 mainframe remains strong, with the programme running at nearly 130 per cent of the previous generation’s pace and 85 per cent of installed MIPs maintaining or increasing capacity.
4. Consulting signings continued to grow: Growth was supported by strong demand for Generative AI projects, while productivity initiatives helped expand IBM’s operating pre-tax margin.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
