IBM shares crashed 25.2% on Tuesday, wiping out nearly $70 billion in market value in a single trading session and marking the technology giant's steepest one-day fall since Black Monday on October 19, 1987, when the stock had dropped 23.7% amid a broader market crash. The sell-off, triggered by a disappointing preliminary update on IBM's June quarter, came directly from CEO Arvind Krishna, who told investors in a letter that "what played out was worse than our expectations."
IBM reported preliminary second-quarter revenue of $17.2 billion, up just 1% year-on-year and well short of market expectations, while unadjusted earnings per share fell 2%, also missing the company's own forecast. The steepest damage came from IBM's infrastructure business, where mainframe revenue declined 7% during the quarter. Krishna explained that IBM had expected some slowdown following the strong launch of its z17 mainframe program earlier in the year, but the scale of the shortfall caught the company off guard.
The core issue was a dramatic shift in enterprise technology budgets. As AI infrastructure spending surged industry-wide, demand for servers, storage systems, and memory chips spiked, pushing up prices and creating supply constraints. Many large enterprise customers accelerated purchases of servers, storage, and memory toward the end of June to secure inventory ahead of anticipated price increases, redirecting capital away from other planned IBM projects. "While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization," Krishna said.
IBM also attributed part of the slowdown to concerns around Anthropic's Mythos AI model, saying customers shifted spending toward cybersecurity after warnings about potential vulnerabilities. The company said the change delayed several large deals expected to close during the quarter.
In a letter to investors, CEO Arvind Krishna acknowledged the company had "faltered," saying IBM did not adapt quickly enough to changing customer priorities, leading to the revenue shortfall.
IBM said it has launched Lightwell, a $5 billion open-source cybersecurity initiative backed by global banks. Despite the weak quarter, the company reported 11% revenue growth at Red Hat and 37% growth in its non-mainframe server and storage business. IBM will report its full quarterly results on July 22.
The sell-off lifted cybersecurity stocks, with investors betting on stronger demand for security software, while shares of IT firms including Infosys and Wipro also declined. The episode highlighted how AI-driven shifts in enterprise spending are reshaping the technology sector.