IBM shares plunge ~25% after earnings miss and shift to AI infrastructure spending

IBM warned that its second‑quarter 2026 revenue would be $17.2 billion, well below analysts’ $17.86 billion estimate, and that adjusted earnings per share would be $2.93 versus the $3.02 forecast. The preliminary results triggered a sharp sell‑off, with the stock falling about 25% – the steepest single‑day drop since 1987 – and wiping out roughly $55 billion of market value.

CEO Arvind Krishna said customers had abruptly redirected capex toward servers, storage and memory to secure AI‑related infrastructure ahead of expected price increases, leaving IBM’s mainframe and software businesses under‑performing. Infrastructure revenue declined 7%, while software grew 5% and Red Hat revenue rose 11%. The company also highlighted rising cybersecurity concerns, citing Anthropic’s Mythos AI model, and announced a $5 billion “Lightwell” initiative to address open‑source software vulnerabilities.

The warning reverberated across the software sector, pulling down other technology stocks such as Microsoft, Salesforce and ServiceNow. Analysts noted the episode underscores the broader impact of AI‑driven budget shifts on legacy software firms.