IBM shares plunge 22% in pre-market after Q2 earnings forecast falls short of estimates

Shares of IBM came under heavy selling pressure in pre-market trading on Tuesday, July 14, plunging 22% to $228 apiece after the company reported preliminary second-quarter sales below analysts' estimates, with Chief Executive Officer Arvind Krishna saying customers were holding back spending.

Preliminary second-quarter revenue came in at $17.2 billion, IBM said in a statement on Tuesday, below analysts' estimates of $17.9 billion.

Sales from the company's infrastructure division were hit particularly hard, falling 7%. IBM is expected to report second-quarter results on July 22.

IBM added that it is still reviewing its books and that the final results may differ slightly from the preliminary figures.

In a letter to investors, Krishna said the weaker-than-expected performance in the software and infrastructure businesses was driven by customers shifting their spending towards servers, storage and memory ahead of anticipated price increases.

If the losses persist, the stock is on track to post its biggest intraday decline since the 1980s. The weak update also weighed on other enterprise software companies, with Workday shares falling more than 8% and ServiceNow declining about 7.7%.

IBM has tried to refashion itself into a high-growth software company through major acquisitions of Red Hat, HashiCorp and Confluent. The company’s new focus has made it a target for investors concerned that artificial intelligence tools will replace many current software products, Bloomberg reported.

In February, IBM saw a steep selloff after AI startup Anthropic PBC unveiled a tool it said could help modernize a dated programming language that runs on IBM mainframes.

Software investors have long been on edge over fears that AI tools capable of automating routine work could pose an existential threat to the industry. Tuesday's announcement showed that even the boom in spending on servers, chips and networking gear for AI was eating into software budgets.

Ksheera Sagar has been working as a Market Research Analyst at LiveMint for the past four years, covering stocks, commodities, and broader financial markets. In this role, he closely tracks daily market movements, corporate earnings, sector trends, and macroeconomic developments. <br><br> He has over a decade of experience in the financial services industry and has previously worked with multiple organisations, including global investment bank J.P. Morgan, bringing strong research experience into the newsroom. <br><br> During his career, he has gained extensive exposure to equity research, market analysis, and financial data interpretation, strengthening his expertise across asset classes and market cycles. <br><br> He is known for his data-driven analysis and crisp, listicle-style market stories that break down complex financial developments across key markets for a wide audience. His strong research skills enable him to write detailed and insightful stories on stocks and sectors, focusing on the underlying factors driving market movements. <br><br> His work combines quantitative insights with clear storytelling, presenting financial developments in a clear and structured manner. Moreover, he enjoys writing multibagger and listicle-style copies. Outside of work, Ksheera enjoys playing the piano and exploring new places. He has a keen interest in travel, music, and continuously learning about global markets and economic trends.

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