IBM stock craters 23% after issuing second-quarter earnings warning
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- IBM shares cratered 23% on Tuesday after releasing preliminary Q2 results showing adjusted earnings of $2.93 per share on $17.2 billion in revenue, missing expectations of $3.01 per share and $17.86 billion.
- Arvind Krishna blamed the shortfall on clients reprioritizing quarterly capex toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.
- Krishna acknowledged in his investor letter that IBM 'faltered,' saying teams 'did not adapt and move quickly enough' and that numerous large deals failed to close on expected timelines, driving most of the gap.
- IBM's Q1 had been a bright spot, with software revenue growing 11% to $7.05 billion and adjusted EPS of $1.91 beating the $1.81 consensus on $15.92 billion in revenue.
- The warning comes as fears grow that AI tools will disrupt legacy software businesses, while memory names like SK Hynix and Micron have emerged as beneficiaries of surging AI infrastructure demand.
Why it matters: The 23% single-day wipeout marks one of IBM's steepest recent declines and, more tellingly, came with a rare CEO admission of execution failure—Krishna said teams 'did not adapt' and large deals slipped. The underlying driver is a structural rotation inside enterprise IT budgets: clients are pulling forward capex into hardware and memory to lock in supply before price hikes, starving software vendors like IBM of the dollars AI infrastructure buildouts were supposed to unlock.
