IBM Shares Plunge More Than 20% After Preliminary Q2 Results Miss Wall Street Estimates

IBM shares tumbled more than 20% in premarket trading Tuesday after the technology company released preliminary second-quarter results that missed Wall Street expectations, citing weaker-than-expected software and infrastructure performance as enterprise customers redirected spending toward hardware purchases.

The sharp sell-off followed an earnings update that showed both revenue and profit falling short of analysts' forecasts, raising concerns about slowing demand across key parts of IBM's business despite continued investment in artificial intelligence infrastructure.

IBM Reports Earnings and Revenue Below Expectations

IBM said it expects to report adjusted earnings of $2.93 per share on $17.2 billion in second-quarter revenue.

According to FactSet estimates, analysts had projected earnings of $3.01 per share on $17.86 billion in revenue, leaving the company below consensus on both metrics.

The disappointing update sent IBM stock down roughly 23% in premarket trading, marking one of its steepest single-day declines in recent years.

CEO Arvind Krishna Explains the Shortfall

Chief Executive Officer Arvind Krishna attributed the weaker results to a shift in customer spending during the final weeks of June.

According to Krishna, many enterprise clients redirected capital expenditures toward purchasing servers, storage systems and memory chips as they sought to secure hardware supply ahead of anticipated price increases.

The change in spending patterns reduced demand for IBM's software and infrastructure offerings during the quarter.

Large Customer Deals Failed to Close on Time

Krishna acknowledged that IBM underestimated the extent of customers' spending shift and said the company also struggled to execute on several large transactions.

He noted that multiple significant deals did not close within the expected timeframe, contributing substantially to the quarterly revenue shortfall.

The CEO said IBM had anticipated some supply chain-related disruption but not the magnitude of customers reprioritizing capital investments.

Hardware Spending Reflects Broader AI Investment Trend

The results highlight how enterprise technology budgets continue to be reshaped by artificial intelligence investments.

As organizations race to build AI infrastructure, spending has increasingly shifted toward high-performance computing hardware, including memory chips, servers and storage equipment, sometimes at the expense of software and consulting purchases.

IBM's latest update suggests those changing priorities affected customer buying behavior more significantly than the company expected during the second quarter.

Investors Await Full Quarterly Results

IBM's preliminary announcement offers an early look at second-quarter performance ahead of the company's complete earnings release.

Investors will closely monitor management's updated outlook for the remainder of the year, particularly whether delayed enterprise deals can be recovered in future quarters and how AI-driven infrastructure spending continues to influence demand across IBM's software, consulting and hardware businesses.