IBM Shares Headed for Record Fall After AI Spending Shift Hits Sales
IBM shares tumbled sharply in premarket trading on Friday after the technology giant warned that second-quarter performance fell well below expectations, putting the company on course for its worst single-day stock market decline in its 115-year history.
The stock dropped as much as 24% before the opening bell, surpassing the company’s previous worst trading day on October 19, 1987, when its shares fell 23.7% during the Black Monday market crash.
The sell-off followed a business update from IBM ahead of its scheduled quarterly earnings release on July 22. Chief Executive Officer Arvind Krishna said customers significantly changed their technology spending priorities during the past three months, directing more funds toward servers, storage systems and memory chips needed for artificial intelligence (AI) data centres.
According to Krishna, the shift left many customers with less budget to invest in IBM’s recently launched z17 mainframe computer, which the company had positioned as a key product for businesses embracing AI.
“What played out was worse than our expectations,” Krishna said. “We did not adapt and move quickly enough.”
The company said soaring demand for AI infrastructure has driven up the cost of critical components such as memory and storage chips, prompting businesses to prioritise securing hardware supplies while they remain available or relatively affordable.
Krishna noted that IBM had anticipated some disruption linked to supply chain pressures but underestimated the extent to which customers would redirect capital expenditure away from other technology investments.
“While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization,” he said.
IBM also said several expected business deals were delayed following the release of Anthropic’s new AI model, Mythos, after the company warned the system could help hackers identify cybersecurity vulnerabilities before organisations detect them. The announcement, IBM said, caused some customers to pause purchasing decisions.
“These conditions require our teams to execute perfectly, and this quarter we faltered,” Krishna said. “These are not excuses, but they are realities.”
In response, IBM said it accelerated the launch of its open-source security platform, Lightwell, to help organisations address emerging cybersecurity concerns linked to advanced AI systems.
Preliminary results released by the company showed revenue grew by just 1% during the quarter, while unadjusted earnings per share declined by 2%, both below IBM’s earlier projections.
IBM’s warning comes as technology companies continue to navigate shifting market conditions driven by rapid AI adoption. Although demand for AI infrastructure remains strong, companies across the sector are adjusting to changing customer spending patterns and rising hardware costs.
IBM shares had already declined about 2% since the start of 2026 before the latest market reaction.
