IBM Shares Suffer Record 25% Drop After CEO Warns on Q2 Results

IBM shares recorded the biggest one-day decline in the company’s 115-year history on Tuesday after CEO Arvind Krishna warned investors that second-quarter performance fell well short of expectations. The stock closed down 25.2% at approximately $217, surpassing its previous worst single-day decline of 23% during the Black Monday market crash on Oct. 19, 1987.

The sharp selloff wiped out roughly $67 billion in market value, reducing IBM’s market capitalization to just under $205 billion. Investors reacted after Krishna described the company’s latest quarterly performance as disappointing and acknowledged that IBM had failed to respond quickly enough to rapidly changing market conditions.

In a letter to shareholders, Krishna said the company expected infrastructure revenue to decline slightly this year following the strong launch of its z17 mainframe platform. However, customer spending shifted far more dramatically than anticipated as businesses redirected capital expenditures toward servers, storage systems and memory to secure hardware affected by AI-driven supply constraints and expected price increases.

Krishna explained that IBM had anticipated some supply chain disruption but underestimated the scale of customers moving budgets away from software purchases and toward AI infrastructure. He also said rapidly evolving cybersecurity concerns across the industry delayed several major customer agreements during the quarter.

Another challenge came from the release of Anthropic’s Mythos AI model. According to Krishna, the announcement caused some customers to postpone significant purchasing decisions while evaluating claims that the model could help identify cybersecurity vulnerabilities before organizations detect them on their own.

Addressing investors, Krishna stated, “What played out was worse than our expectations. We did not adapt and move quickly enough.” He added that the disappointing results reflected operational shortcomings rather than excuses, while emphasizing that IBM remains confident in its long-term portfolio and business strategy despite the weak quarter.

Investors will receive additional details when IBM reports second-quarter earnings on July 22. According to FactSet estimates, Wall Street expects the company to post quarterly revenue of $17.2 billion and earnings of $2.93 per share, representing annual growth of 1.3% and 3.5%, respectively.

IBM has faced mounting pressure from the rapid expansion of AI infrastructure throughout the technology sector. Earlier this year, the company’s shares experienced their steepest decline since 2000 after Anthropic introduced an AI tool designed to simplify updates for COBOL, the longstanding business programming language closely associated with IBM’s enterprise systems. Similar concerns have affected other software companies as advances in artificial intelligence continue to reshape customer spending and increase expectations for automation.