● Covered by 2 sources · 2 reportsHigh impact1 neutral
IBM shares drop 25% after disappointing Q2 results and profit warning
Key points
- IBM's Q2 revenue was $17.2 billion, missing expectations.
- Shares plunged over 25%, the largest single-day decline.
- Mainframe business revenue declined by 42%.
- Corporate spending shifted to AI infrastructure and cybersecurity.
- IBM lowered its full-year growth forecasts.
Shares Plunge After Poor Q2 Results
IBM experienced a significant drop in its share price, falling over 25% after the release of its preliminary second-quarter earnings results. The revenue reported of $17.2 billion marked only a 1% increase year-over-year and was below the anticipated $17.86 billion, raising alarms among investors.
Change in Corporate Spending Priorities
The company attributed the disappointing results to a shift in corporate customers' spending from software solutions to datacentre infrastructure and cybersecurity. This trend coincides with a global tech push to enhance AI infrastructure, leading to supply shortages for essential hardware.
Impact of AI on Business Strategies
IBM pointed out that many customers have redirected their quarterly capital expenditure towards purchasing servers and memory products, as they aim to secure supply amid rising prices. This diversion has adversely affected sales of IBM's high-margin mainframe systems and related software offerings.
Reactions from Market Analysts
Investors and analysts have expressed concern about the implications of IBM's results on the broader software sector. Chris Beauchamp, chief market analyst at IG Group, emphasized the uncertainty about the longevity of the trend favoring infrastructure and cybersecurity investment over traditional software.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
IBM reported quarterly earnings below Wall Street expectations, with its mainframe business revenue declining by 42%, causing a 25% stock drop. The company attributes this decline to customers diverting budgets to other hardware due to significant price increases driven by the AI build-out boom. IBM insists the mainframe sales delay is temporary and customers will eventually purchase new systems.
IBM's shares declined over 25% following a profit warning and disappointing preliminary Q2 results. Revenue of $17.2 billion fell short of analysts' expectations, reflecting a shift in corporate spending priorities amidst rising demand for AI infrastructure.