IBM suffered its steepest single-day stock market decline in history after preliminary second-quarter results disappointed investors, sending its shares tumbling 25 per cent. The sharp sell-off followed weaker-than-expected performance in the company’s software and infrastructure businesses, prompting Chairman and CEO Arvind Krishna to issue a candid letter explaining the setbacks and outlining IBM’s long-term strategy.
The decline surpassed IBM’s previous worst trading day during the 1987 stock market crash, when the stock fell 23.7 per cent.
CEO admits IBM failed to execute
Krishna acknowledged that IBM failed to respond quickly as customers shifted spending priorities during the final weeks of the quarter. Several large software and infrastructure deals were delayed, hurting revenue.
The company reported $17.2 billion in revenue, up just 1 per cent year-on-year, while infrastructure revenue declined 7 per cent. Customers reportedly diverted spending towards servers, storage and memory hardware amid supply concerns and rising cybersecurity challenges.
Mainframe business misses expectations
IBM’s infrastructure division delivered its biggest disappointment despite a strong launch of its z17 mainframe earlier this year. Krishna said customers postponed purchases of both mainframe hardware and related software, resulting in weaker-than-expected sales.
However, he noted that adoption of the z17 continues to outperform its predecessor, with customer workloads remaining strong.
AI and quantum remain key priorities
Despite the disappointing quarter, IBM reaffirmed its commitment to artificial intelligence. The company recently launched Lightwell, a $5 billion AI initiative combining IBM and Red Hat technologies to strengthen open-source software security. More than 20,000 engineers have been assigned to the project, with several leading global financial institutions already participating.
Krishna also reaffirmed IBM’s ambitious quantum computing plans. The company will invest over $10 billion in quantum technology over the next five years and aims to deliver the industry’s first large-scale fault-tolerant quantum computer by 2029.
Growth areas still offer optimism
While overall results fell short of expectations, IBM highlighted continued growth in several businesses. Software revenue rose 5 per cent, Red Hat recorded 11 per cent growth, and the distributed infrastructure business grew 37 per cent. Consulting demand also remained healthy, supported by increasing enterprise investment in generative AI.
IBM is expected to provide further details on its recovery strategy when it releases full second-quarter earnings on July 22.