Jul 14, 2026
IBM shares dropped 24% in premarket trading Tuesday after the tech giant unexpectedly released preliminary second-quarter earnings a week ahead of schedule.
If the losses hold, it would mark the stock’s steepest one-day decline since Black Monday in 1987, when IBM fell 23.7% during the worst day in U.S. stock market history.
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“This quarter we faltered,” CEO Arvind Krishna wrote in a letter to investors, acknowledging the company “did not adapt and move quickly enough” as customers redirected technology budgets toward AI servers, storage and memory.
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IBM reported preliminary second-quarter revenue of $17.2 billion, up 1% from a year earlier. Krishna said IBM expected some disruption from supply-chain constraints, but underestimated how dramatically customers would shift their spending. The shift hurt IBM’s infrastructure business, delayed several large deals and weighed on quarterly results.
IBM did not immediately respond to Moneywise’s request for comment.
AI spending squeezes other technology budgets
As businesses raced to secure AI servers, storage and other data center equipment, many pulled spending away from other technology projects. The biggest hit came in the company’s infrastructure division, where revenue fell 7% during the quarter, even as software revenue rose 5%.
Krishna said IBM expected some disruption from supply-chain constraints but underestimated how dramatically customers would shift their spending.
“While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization,” Krishna said.
The CEO acknowledged IBM also bears responsibility for the disappointing quarter.
“These are not excuses, but they are realities,” he wrote.
The shift also hurt sales of IBM’s flagship z17 mainframe. IBM had expected the product to build on what it described as the strongest launch of any mainframe in its history. Instead, customers delayed purchases and several large deals failed to close before the end of the quarter.
The z17 is designed to handle high-volume transactions while using AI to detect fraud in real time. According to IBM, the system powers everyday financial activity, including credit card purchases, ATM withdrawals and stock trades.
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More than one headwind
IBM’s results come as businesses pour record amounts of money into AI infrastructure. Research firm IDC expects global AI infrastructure spending to reach $487 billion in 2026, up 53% from a year earlier, as companies continue investing in equipment needed to power AI systems.
IBM isn’t the only technology company navigating changing AI spending patterns. Microsoft, Meta, Amazon and Alphabet have collectively committed hundreds of billions of dollars toward AI infrastructure this year as they race to expand computing capacity.
The rapidly evolving cybersecurity concerns caused some customers to delay purchasing decisions, pushing several large deals beyond the end of the quarter.
The company said it has already moved to respond, launching Lightwell, an open-source security platform designed to help organizations identify and fix software vulnerabilities.
Despite the disappointing quarter, Krishna said he remains confident in IBM’s long-term strategy. The company is scheduled to release its final quarterly results and hold its earnings call on July 22, when investors will get a fuller picture of its outlook.
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Victoria Vesovski is a Toronto-based staff reporter at Moneywise covering personal finance, lifestyle and trending news. She holds degrees from the University of Toronto and New York University, and her work has appeared on platforms including Yahoo Finance, MSN Money and Apple News.
