- IBM's stock ended trading down more than 25%, marking its worst drop since at least 1968, after the company preannounced earnings that fell well below Wall Street's expectations.
- Analysts had expected IBM to report adjusted earnings per share (EPS) of $3.02 on revenue of $17.86 billion, but the company posted adjusted EPS of $2.93 and revenue of $17.2 billion.
- CEO Arvind Krishna stated that the results were far worse than projected and are at least partially related to the global memory shortage.
- Krishna noted that in late June, clients shifted their capital expenditures toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.
- IBM's stock plummeted 25.2% to around $217 at market close on Tuesday, erasing about $67 billion from its market capitalization.
- Krishna mentioned that customers adjusted their technology budgets as demand from AI data centers made servers, storage, and memory harder to obtain.
- The company's chief competitors are also struggling, with shares of Oracle down 33% year to date and Microsoft declining 20%.
- IBM will hold its quarterly earnings call on July 22, where it is expected to report $17.2 billion in quarterly revenue and $2.93 earnings per share.
IBM's stock suffered its largest single-day loss in 115 years, closing down 25.2% to around $217, erasing $67 billion from its market capitalization. CEO Arvind Krishna attributed the disappointing results to a shift in customer spending towards AI hardware, stating, "What played out was worse than our expectations. We did not adapt and move quickly enough."156
Analysts had projected adjusted earnings per share (EPS) of $3.02 on revenue of $17.86 billion, but IBM reported $2.93 EPS and $17.2 billion in revenue. Krishna noted that customers adjusted their technology budgets due to rising demand for AI data centers, which made servers and memory harder to obtain. He explained, "This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization."27
The stock's decline topped the infamous Black Monday crash of October 19, 1987, when IBM fell 23%. The company will hold its quarterly earnings call on July 22, with Wall Street expecting only modest annual increases of 1.3% in revenue and 3.5% in EPS. Competitors like Oracle and Microsoft are also facing declines, with shares down 33% and 20% year-to-date, respectively. Krishna's comments reflect broader concerns about the impact of AI on traditional software businesses, as global software companies see their shares plummet amid fears of automation.9
“CEO Arvind Krishna attributed the miss to customers shifting spending toward AI servers and away from software, a trend the company failed to anticipate. The drop erased $67 billion in market value, and IBM will report full Q2 results on July 22.”
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