IBM shares tumble 25% after earnings warning and AI‑driven spend shift

IBM announced a pre‑earnings warning on July 14, 2026, saying its second‑quarter results would be "worse than our expectations." Revenue reached $17.2 billion, up 1% year‑over‑year but below the $17.86 billion consensus, and adjusted earnings per share were $2.93 versus the $3.01 expected. The announcement triggered a roughly 25% drop in the stock, erasing about $67 billion of market value and marking the worst single‑day decline in the company's 115‑year history.

CEO Arvind Krishna explained that enterprise customers shifted capital spending toward AI‑focused hardware—servers, memory and storage—to lock in supply‑constrained components before price hikes. This reallocation hit IBM's infrastructure segment, which fell about 7%, while software revenue grew 5% and the z17 mainframe line underperformed. Analysts responded with mixed views: Oppenheimer downgraded the stock to "Perform" and cut its target price, while some commentators suggested the steep decline could present a buying opportunity.

The broader implication is a rapid reprioritisation of IT budgets away from traditional software toward AI infrastructure, challenging IBM's legacy business model and prompting scrutiny of its hybrid‑cloud and AI strategy.