After Wall Street saw preliminary earnings results for IBM, it panic sold it down 26%, vaporizing $72 billion of market value before noon. It was the worst single day for IBM since Black Monday in 1987 when its stock dropped 23%.
The 114-year-old Dow component, long a synonym for corporate stability, plunged after pre-announcing its second quarter.
Technically, it wasn’t scheduled to report full results for another week but for some reason, CEO Arvind Krishna wanted to let traders sell early.
This morning, IBM plunged below $214 per share, 26% lower than its Monday close of $290.23. Its market cap fell to $200 billion, down from $272 billion at the close of business yesterday.
By noon, trading volume had already surpassed 37 million shares — 3X its daily average.
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IBM crashes as customers spend elsewhere
IBM released preliminary figures ahead of its July 22 earnings report, and they fell far below analysts’ estimates.
Revenue rose a meager 1% to $17.2 billion, short of the roughly $17.9 billion Wall Street expected. Infrastructure revenue fell a concerning 7%. GAAP diluted earnings failed to improve, slipping 2% to $2.27 per share.
The company also blamed a shortfall in its Z mainframe line and the transaction processing software that runs on it.
That mainframe stumble is a stark trend reversal. Just one quarter earlier, Z hardware revenue had surged 51% thanks to strong z17 demand. Apparently, however, demand didn’t persist.
The CEO admits to catastrophe
The preliminary numbers immediately jeopardize IBM’s full-year target. As recently as April, the company had reaffirmed guidance of 5% constant-currency revenue growth in 2026 that is now unlikely to transpire.
A statement from Krishna was, by the standards of corporate disclosure, a confessional.
“This quarter we faltered. We did not adapt and move quickly enough,” Krishna wrote. He conceded that “numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.”
The CEO blamed a “magnitude of the CapEx reprioritization” by customers, which is a fancy way of saying that customers didn’t allocate their capital expenditures to IBM.
Instead, according to Krishna, they were distracted by “industry-wide cybersecurity” concerns during the quarter. That’s another fancy way of describing AI displacing IBM’s services.
Another Jim Cramer pick crashes
Enterprise software and IT-services names slid in sympathy, with Accenture, Cognizant, and Infosys all falling. Traders treated one company’s missed deals as a warning for the whole sector.
Clients shifted capital toward AI, servers, and memory chips ahead of expected price increases, and IBM misjudged the scale and speed of those migrations.
Krishna attempted to highlight bright spots. IBM’s Red Hat revenue growth accelerated to 11%, and Distributed Infrastructure posted what he called its best quarter on record, up 37%. Investors took no consolation.
CNBC’s Jim Cramer had spent months championing the stock, telling viewers earlier this year that IBM was “inexpensive relative to its growth rate” and that Krishna was “top-notch.”
IBM will file its full second quarter 2026 earnings with the SEC on July 22. The company has already told everyone how it will go.
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