IBM Shares Plunge 25%, Deeper Shock Than on Black Monday

[Financial News]  

IBM shares fell 25% on the 14th local time. The weak preliminary report for second-quarter earnings triggered the sell-off.
According to the Financial Times, the 25% drop marked the biggest decline in at least 54 years, since 1972. It was even more severe than on Black Monday, October 19, 1987, when IBM shares fell 23.7%.
Before its official earnings release, IBM disclosed that second-quarter revenue came to $17.2 billion and adjusted earnings per share were $2.93. Wall Street analysts surveyed by FactSet had expected revenue of $17.86 billion and adjusted EPS of $3.01.
Investors dumped the stock after results fell far short of market expectations.
CEO Arvind Krishna said the main reason was weakness in the software and infrastructure divisions. He explained that customers shifted capital spending away from IBM software and toward hardware purchases such as memory semiconductors.
In a letter to investors, Krishna said, "During the last few weeks of June, customers redirected quarterly capital spending toward servers, storage, and memory purchases as they tried to secure infrastructure before planned price increases and supply constraints." He added, "We anticipated some supply-chain disruption, but we did not expect capital spending to shift this much."
Krishna added, "In this kind of environment, we have to execute perfectly ... but we failed to adapt and we failed to move quickly," and said that "many large contracts were not delivered on time, which led to the weak results."
IBM released the disappointing results amid growing concern that AI agents could weigh on software companies.
In an interview with CNBC on the day, Krishna said, "Mythos from Anthropic has made people stop and ask themselves, 'How much should we spend on cyber?'" He added, "They have paused new contracts until they can verify this." He was referring to Anthropic's Mythos AI agent, which is known for neutralizing existing cybersecurity defenses and has reportedly delayed companies' decisions to invest in new software.
He nevertheless expressed confidence that IBM's software would "not be shaken at all by AI."
Meanwhile, IBM is not only a leading enterprise software company but also a global leader in quantum computing. It is widely seen as having built the most concrete ecosystem and roadmap for commercialization, moving beyond the laboratory stage. To strengthen that leadership, IBM plans to invest more than $10 billion over the next five years in quantum technology and commercialization.
IBM closed at $217.07, down $73.16, or 25.21%, on the day.

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