Why IBM Stock Crashed 25% Even as AI Spending Exploded - Yahoo Finance

What the report says

Yahoo Finance reported that IBM shares fell 25.2% on July 14, wiping out about $68 billion in market value in what the article described as the company’s worst trading session on record. The drop came despite continued enthusiasm for artificial intelligence spending, with the report citing Gartner’s expectation that global AI outlays will rise 47% to $2.59 trillion in 2026, including $1.43 trillion for infrastructure.

According to the article, the sell-off was driven by IBM’s preliminary second-quarter update, released eight days before scheduled earnings. IBM said revenue rose 1% to $17.2 billion, about $660 million below LSEG consensus, while adjusted earnings of $2.93 per share were short of the $3.02 estimate. Software revenue growth slowed to 5%, consulting was unchanged, and infrastructure revenue fell 7%, although distributed infrastructure increased 37%.

The report said CEO Arvind Krishna told investors IBM had “faltered,” with customers rushing late in June to secure constrained servers, storage and memory before expected price increases, while cybersecurity concerns also competed for budgets. Several large deals reportedly moved beyond the quarter, and IBM Z and related transaction-processing software missed expectations.

Yahoo Finance framed the decline as a reset of investor expectations after IBM’s shares had more than doubled over five years and traded at about 26 times forward earnings before the update. It noted IBM’s acquisitions of Red Hat, HashiCorp and Confluent, a $12.5 billion generative AI book, and an Oppenheimer downgrade after weaker software growth. The article concluded IBM may be a hold rather than an automatic buy after the sharp fall, pending evidence that delayed deals close and software momentum improves.