‘An ugly moment for IBM and software stocks’: Big Blue set to lose US$70 billion in market value today after earnings warning
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- IBM shares fell 25% on Tuesday, set for a steeper single-day decline than the 1987 Black Monday crash, wiping roughly $70 billion from its $272.78 billion market valuation.
- CEO Arvind Krishna told investors that in late June clients shifted quarterly capex toward servers, storage and memory to secure supply-constrained infrastructure ahead of expected price increases, and that "numerous large deals" failed to close.
- IBM forecast Q2 revenue growth of just 1% to $17.2 billion — below the $17.86 billion analyst estimate — and adjusted EPS of $2.93 versus the $3.02 consensus, blaming weakness largely in its mainframe business.
- Krishna said clients are also prioritizing cybersecurity spending, noting that Anthropic's Mythos model has jolted businesses with its ability to expose flaws in software and encryption systems.
- Other software stocks — Microsoft, ServiceNow, Salesforce, Intuit — fell between 2% and 5%, and Canadian peers CGI Group, OpenText and Constellation Software dropped more than 3%.
- IBM highlighted more than $10 billion committed to building the first large-scale quantum computer by 2029 and expanding AI partnerships including with OpenAI, though it conceded those efforts remain too small to offset core weakness.
- IG Group's Chris Beauchamp called it "an ugly moment for IBM and software stocks," warning that "a few more months might be bearable, but more than that and serious questions will be asked all over again."
Why it matters: A 25% single-day wipeout at a $272 billion legacy tech giant proves the AI capex rotation is no longer theoretical — corporate dollars are actively leaving software line items for servers, chips and memory, and IBM's own forecast says clients are still piling into cybersecurity on top. If the shift persists past a quarter, Beauchamp's "serious questions" about software valuations stop being a sell-side warning and start being the baseline read on the sector.
