Important points:
- IBM stock falls 25%
- Tech industry veteran ‘flinches’
- Client purchasing a server
IBM’s CEO sent the company’s stock plummeting after warning that a profit squeeze could be on the horizon.
⚠️ big blue falls off a cliff
- IBM IBM It was the worst trading day in modern history after issuing a profit warning that blindsided Wall Street.
- As investors hit the eject button, the stock price plummeted 25%, wiping out nearly $70 billion in market capitalization.
- The company’s decline was the biggest since at least 1972 and exceeded IBM’s decline during the Black Monday crash of 1987. Not exactly the kind of history a CEO would want to make.
- Before Tuesday, IBM was already lagging the broader market, down 2% in 2026 while the S&P 500 rose nearly 10%.
🤖 AI changes your shopping list
- CEO Arvind Krishna acknowledged that IBM had been “underperforming” in the past quarter as customers redirected spending to AI servers and storage rather than the company’s traditional mainframe systems.
- IBM had anticipated an increase in demand for its mainframes, the high-performance computers used by large companies to process large workloads, but several large deals were not completed on time.
- “In these situations, our teams are expected to perform flawlessly, and this quarter we stalled,” Krishna said, adding that IBM simply did not move fast enough as customer priorities changed.
📉 Mistakes across the board
- IBM expects quarterly revenue of $17.2 billion, below Wall Street’s estimate of $17.9 billion. Adjusted earnings are expected to be $2.93 per share, below analysts’ expectations of $3.01.
- Infrastructure revenue is expected to decline 7%, while software is expected to increase 5% and consulting will remain roughly flat.
- On paper, this failure isn’t that big of a deal, but investors were far more concerned about what the CEO would say about future demands.
- Ironically, IBM’s warning may be bullish for the rest of the AI industry. If companies delay traditional IT purchases to increase spending on AI hardware, chipmakers and infrastructure providers could cash the checks and Big Blue could end up keeping the receipts.
