IBM suffered its steepest single-day stock decline on record after shares plunged about 25 per cent on July 14 following an unexpected warning that its second-quarter results would fall short of Wall Street expectations.
The selloff erased roughly US$70 billion from IBM’s market value and marked a larger one-day percentage decline than the technology company’s losses during the 1987 stock market crash.
The sharp drop came after IBM projected second-quarter revenue of approximately US$17.2 billion, below analysts’ expectations of nearly US$17.9 billion. Adjusted earnings are forecast at US$2.93 per share, also missing market estimates.
Weakness in IBM’s software and infrastructure businesses contributed to the disappointing outlook.
AI spending shifts corporate technology budgets
IBM CEO Arvind Krishna said enterprise customers have increasingly redirected technology budgets toward artificial intelligence infrastructure, including servers, data storage and memory chips.
The shift has resulted in some companies delaying or cancelling software purchases as they prioritize spending on the hardware required to support AI systems.
IBM acknowledged that it underestimated the scale and speed of the change in customer spending patterns.
The company’s flagship z17 mainframe business also failed to generate the momentum expected by management. Infrastructure revenue declined as clients postponed purchases, while several major enterprise agreements were pushed beyond the quarter.
IBM also admitted to execution problems, saying some large deals did not close on schedule and the company failed to respond quickly enough to rapidly changing market conditions.
IBM warning pressures broader technology sector
The company’s outlook also weighed on other major technology stocks as investors reassessed the impact of the AI investment boom on enterprise software companies.
Shares of Microsoft, Salesforce, ServiceNow and Intuit declined amid concerns that corporate technology budgets are increasingly being directed toward AI hardware and infrastructure rather than traditional software.
The reaction raised broader questions about whether semiconductor manufacturers and hardware suppliers could benefit more from the AI spending surge in the short term while software companies face slower demand.
Investors are also watching whether pressure on software spending could continue if businesses remain focused on building AI infrastructure.
IBM maintains long-term AI and quantum strategy
Despite the weaker quarterly outlook, IBM reiterated its confidence in its long-term transformation strategy.
The company pointed to continued growth at Red Hat and expanding artificial intelligence partnerships as key areas of opportunity.
IBM also plans to invest more than US$10 billion in quantum computing over the next five years as it seeks to strengthen its position in emerging technologies.
However, the historic stock decline underscores growing investor concerns over how rapidly the AI boom is reshaping corporate technology spending and whether established software and technology companies can adapt to changing customer priorities.
