IBM shares suffer biggest single-day fall in nearly six decades

IBM shares suffered their biggest single-day fall in nearly six decades on Tuesday as bearish sentiment gripped the stock after the technology company’s preliminary second-quarter results fell short of Wall Street expectations. The management commentary didn’t do any good to the stock with Chief Executive Officer Arvind Krishna saying that the company’s software and infrastructure businesses were hit as enterprise customers shifted spending towards hardware purchases such as servers, storage and memory chips.

The company said it expects Q2 revenue of $17.2 billion, missing analysts’ forecast of $17.86 billion, according to LSEG data. IBM also projected adjusted earnings of $2.93 per share, below the Street estimate of $3.02 per share.

Following the announcement, IBM stock dropped as much as 23% in premarket trading.

The weak update weighed on the broader software sector, with shares of Microsoft, ServiceNow, Salesforce and Intuit declining between 3% and 5%. The iShares Expanded Tech-Software Sector ETF also fell more than 4%.

Explaining the shortfall, IBM Chief Executive Officer Arvind Krishna said the company’s software and infrastructure businesses were hit as enterprise customers shifted spending towards hardware purchases such as servers, storage, and memory chips.

“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,” Krishna wrote in a letter to investors. “While we anticipated some supply chain-related impact in our expectations, we did not anticipate the magnitude of the capex reprioritisation.”

Krishna also acknowledged that IBM failed to respond quickly enough to the changing spending patterns.

“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,” he said.

The update underscores a broader shift in enterprise technology spending, with companies directing a larger share of their budgets towards AI infrastructure rather than traditional software.

While businesses supplying AI hardware—including servers, chips and memory—continue to benefit from strong demand, software vendors are facing a tougher spending environment as customers defer or reduce purchases.

IBM’s preliminary results suggest enterprises are prioritising investments in data centre infrastructure, leaving software spending under pressure despite the ongoing artificial intelligence boom.