IBM Shares Plunge 20% After CEO Warns Q2 Results Worse Than Expected

IBM's stock plummeted 20% in early trading on Tuesday following an unexpected warning from the company's management ahead of its quarterly earnings report. According to strategist Mike Zaccardi on social media platform X, this marks IBM's worst trading day since 1961, with a shock comparable to the 23% single-day drop in October 1987. The technology giant now forecasts second-quarter revenues of $17.2 billion, falling short of analysts' expectations of $17.85 billion. Earnings per share are also projected at $2.93, below the anticipated $3.02.

In a special letter to investors, IBM CEO Arvind Krishna explained the disappointing results, highlighting that the launch phase of the z17 mainframe series, initially expected to cause only a slight single-digit decline in infrastructure division revenues, performed significantly worse than anticipated. Weak performance in the z17 series and its associated software, particularly in transaction processing, contributed to the shortfall.

Additionally, in late June, IBM observed a shift in customer purchasing patterns, with clients reallocating quarterly investment budgets towards servers, storage, and memory to secure limited supply components ahead of expected price increases. While IBM had accounted for some supply chain impacts, it did not foresee the magnitude of this capital investment shift, which was also influenced by rapidly evolving cybersecurity concerns across the industry.