What were IBM's second-quarter results, and how did they miss expectations?

IBM earned $2.93 per share on $17.2 billion in revenue. Wall Street had expected $3.01 per share and $17.86 billion in revenue, according to FactSet.

Why did IBM's stock fall so sharply, and is it the worst day ever?

IBM's 25% drop on July 14 is the worst single day since records began in 1968, even worse than its previous record drop on October 19, 1987. The decline followed the company's weak earnings warning.

What is CEO Krishna saying about AI's threat to IBM's business?

Krishna stated: "We don't see our software being disrupted by AI at all." He attributed the miss to customers shifting spending toward AI hardware and chip purchases before prices rise, and to delayed deals—not to fundamental disruption of IBM's software products.

AI Safety & AlignmentAI Business & IndustryYahoo Finance AIJul 26, 2026Jul 26, 2026, 19:00 JST

IBM stock plunges 25% on weak guidance; software chief insists no AI threat

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3 Key Points

What happened
IBM's stock dropped 25% on July 14, its worst day since 1968, after the company warned of weak second-quarter results—$2.93 per share and $17.2 billion in revenue versus Wall Street expectations of $3.01 per share and $17.86 billion. CEO Arvind Krishna cited a shift in customer spending toward AI hardware and delayed major deals, but stated firmly that IBM's software business is not being disrupted by AI.
Why it matters
This is IBM's second major stock shock tied to AI fears in 2024. In February, when Anthropic released a Cobol-rewriting tool, investors panicked that IBM's legacy software business would suffer—but Krishna's reassurance proved correct and the stock recovered to new highs by June. Now the stock has fallen even further on different trigger (spending shifts and deal delays), raising the question of whether Krishna's confidence is justified this time or whether a real structural problem is finally surfacing.
What to watch
IBM's total market value fell to just under $200 billion by week's end. Options traders are pricing in extreme uncertainty—the cost of betting on big IBM stock swings reached one of its highest levels ever, even higher than during the 2022 interest rate shock, suggesting the market expects sharp moves in either direction rather than accepting defeat.

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Context & Analysis

IBM's July plunge echoes February's AI panic but with a sharper edge. In February, when Anthropic released a Cobol-rewriting tool, investors feared IBM's legacy software franchise would be obsoleted; Krishna dismissed the concerns as overreaction, and he was vindicated—the stock bounced back to new highs by June. This time, however, the stock has fallen even further on a different mechanism: not a single technological threat, but a broad customer spending reallocation toward AI infrastructure, plus real deal delays (some reportedly tied to companies pausing cybersecurity spending while they reassess needs in light of Anthropic's Mythos model). Krishna is again insisting the core business is sound, but the magnitude and nature of the second shock—real revenue and earnings misses, not just market sentiment—suggest investors may be wrestling with something more structural than February's one-product scare. The fact that software sales grew 11% to $7.05 billion in the prior quarter and beat expectations on both metrics offers some support for Krishna's bullish framing, yet it also underscores that the slowdown emerged suddenly.

FAQ

What were IBM's second-quarter results, and how did they miss expectations?: IBM earned $2.93 per share on $17.2 billion in revenue. Wall Street had expected $3.01 per share and $17.86 billion in revenue, according to FactSet.
Why did IBM's stock fall so sharply, and is it the worst day ever?: IBM's 25% drop on July 14 is the worst single day since records began in 1968, even worse than its previous record drop on October 19, 1987. The decline followed the company's weak earnings warning.
What is CEO Krishna saying about AI's threat to IBM's business?: Krishna stated: "We don't see our software being disrupted by AI at all." He attributed the miss to customers shifting spending toward AI hardware and chip purchases before prices rise, and to delayed deals—not to fundamental disruption of IBM's software products.

Yahoo Finance AIRead Original Article

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