IBM shares fell nearly 25% on Tuesday, wiping out almost $69 billion in market value after the company released preliminary second-quarter financial results ahead of its scheduled earnings announcement. The update showed revenue and earnings below market expectations, while IBM attributed much of the shortfall to a rapid increase in customer spending on AI infrastructure that delayed several major enterprise deals.
According to IBM’s official investor update, the company expects second-quarter revenue of $17.2 billion, representing 1% year-over-year growth, below analysts’ expectations of $17.86 billion. Operating (non-GAAP) earnings per share are expected to reach $2.93, compared with the consensus estimate of $3.02. Software revenue increased 5%, Consulting remained broadly flat, Infrastructure revenue declined 7%, and year-to-date free cash flow reached approximately $4.8 billion. Despite steady performance across some business segments, the weaker-than-expected quarter triggered a sharp decline in IBM’s stock and erased nearly $69 billion in market value.
Technology Spending Realigns
IBM said customer priorities changed rapidly during the final weeks of the quarter as many organizations accelerated purchases of servers, storage systems, networking equipment, and memory to secure AI infrastructure while supply remained constrained. Therefore, fewer software and infrastructure deals were completed before the quarter closed, affecting the company’s quarterly performance.
IBM Acknowledges Execution Challenges
In a letter to investors, Chairman and CEO Arvind Krishna acknowledged that IBM was unable to respond quickly enough to changing customer demand.
Krishna wrote that IBM “did not adapt and move quickly enough,” adding that several large enterprise contracts failed to close within the expected timeframe and became one of the primary reasons behind the revenue shortfall. He also noted that growing cybersecurity concerns influenced purchasing decisions across parts of the customer base during the quarter.
IBM added that it had anticipated some disruption from supply constraints; however, it underestimated how quickly customers would redirect capital spending toward AI infrastructure.
Market Sentiment Weakens
IBM’s update also affected the broader technology sector as investors reassessed whether changing enterprise IT budgets could influence other software companies. Shares of several enterprise technology firms, including Microsoft, Salesforce, and ServiceNow, also declined following IBM’s announcement.
The market reaction highlighted growing investor attention on how businesses are allocating technology budgets as demand for AI infrastructure remains strong. It also demonstrated how quickly confidence can change when companies report weaker-than-expected earnings and acknowledge changing customer priorities.
IBM’s Full Earnings Report
IBM will release its full second-quarter financial results on 22 July, when investors are expected to seek greater clarity on delayed enterprise contracts, the company’s full-year outlook, and whether current enterprise IT spending patterns continue in the coming months. The results are likely to provide a clearer picture of how changing customer priorities are influencing one of the world’s largest enterprise technology companies.