IBM shares tumbled 24% in premarket trading after the tech giant unexpectedly released preliminary second-quarter earnings a full week ahead of schedule.
If the losses hold, it would mark the steepest one-day decline for IBM (IBM) since Black Monday in 1987, when the stock fell 23.7% during the worst day in U.S. stock market history.
According to strategist Mike Zaccardi, the drop could represent IBM’s worst single-day performance dating all the way back to 1961.
IBM reported preliminary second-quarter revenue of $17.2 billion, falling well short of analyst estimates of $17.85 billion for the period.
Non-GAAP earnings came in at $2.93 per share against analyst expectations of $3.02, compounding investor concerns about the company’s near-term trajectory.
Revenue grew just 1% from a year ago, with infrastructure revenue down 7%, consulting revenue flat, and software revenue posting a modest 5% gain.
CEO Arvind Krishna said customers rapidly changed their technology budgets over the past three months, scrambling to acquire servers, storage, and memory that AI datacenters are consuming at a rapid pace.
That shift left IBM customers with less capital to spend on its new z17 mainframe computer, which the company had been counting on to attract business clients in the AI era.
“This dynamic impacted client buying patterns,” Krishna wrote in a letter to investors, adding that IBM “did not anticipate the magnitude of the capex reprioritization.”
“This quarter we faltered,” Krishna wrote, acknowledging the company “did not adapt and move quickly enough” as customers redirected technology budgets toward AI servers, storage, and memory.
IBM’s warning rippled across the broader market, with Salesforce dropping 4% in early morning trading before rebounding and Microsoft slipping 3% before recovering some ground.
Storage companies told a different story, with Micron stock rising 5% in afternoon trading and Sandisk climbing nearly 6% as investors bet on continued infrastructure spending.
Despite the disappointing quarter, Krishna said he remains confident in IBM’s long-term strategy as the company prepares to release its full quarterly results on July 22.
Investors will be watching the upcoming earnings call closely for any updated guidance on how IBM plans to navigate the ongoing shift in enterprise technology spending priorities.
