IBM's stock just had its worst day ever after the surprise release of an earnings miss

By Hannah Pedone and Tomi Kilgore

Tech bellwether releases preliminary results a week before earnings were expected, with revenue and profit seen well below expectations

IBM's stock plunges after a preliminary release of profit and revenue that were well below Wall Street's expectations.

Shares of IBM were suffering a record selloff on Tuesday, after the technology giant surprised investors by releasing second-quarter results a week ahead of schedule, showing both profit and revenue missing analysts' consensus expectations.

The problem was the launch of the z17 mainframe program, which the company expected to be wrapping up during the second quarter.

"What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in transaction processing," CEO Arvind Krishna said in a statement.

And as BNP Paribas analyst Stefan Slowinski put it, "there was no indication that this trend has yet abated," and investors likely won't find out more the company reports full results on July 22.

The stock (IBM) tumbled 25.2%, the biggest one-day drop on record, based on available data back to Jan. 21, 1972, according to Dow Jones Market Data. That broke the previous record for a one-day drop of 23.7% seen on Oct. 19, 1987, a date known as Wall Street's "Black Monday" because the Dow Jones Industrial Average DJIA had dropped a record 22.6%.

The selloff essentially wiped out the rocket ride investors enjoyed in late May, when the stock spiked up 46.3% from May 20 to the June 2 record close of $329.23, after the announcement that the Trump administration was making an investment to help accelerate development of specialized chips for quantum computing.

Krishna said that in the last few weeks of June clients shifted capital expenditures toward memory purchases, storage and servers ahead of expected price increases, which impacted client buying patterns.

While some supply-chain-related impact to IBM's prior expectations were foreseen, "we did not anticipate the magnitude of the capex reprioritization," Krishna said.

IBM said adjusted earnings per share were up 5% from a year ago to $2.93, but that was below the average analyst estimate of $3.01 compiled by FactSet. That would be the first bottom-line miss for the company in at least five years, based on available FactSet data back to April 2021.

Revenue rose 1% to $17.2 billion, well below the current FactSet consensus of $17.86 billion. The company said software revenue grew 5%, but the current FactSet consensus of $8.14 billion implies 10.2% growth.

The company said it was still working to finish up its financial reporting so the results were "preliminary," and final results, scheduled to be released on July 22, after the closing bell, "could be slightly different."

Krishna also pointed to failed deal execution as a key reason for the company's disappointing performance.

"We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall," he said.

He added that IBM clients were "distracted" by cybersecurity concerns during the quarter.

"These conditions require our teams to execute perfectly, and this quarter we faltered...[t]hese are not excuses, but they are realities," he wrote.

If there's a silver lining, Mizuho's Daniel O'Regan said IBM's report reinforces that AI infrastructure spend "remains robust."

He said, however, that the read-through is "probably more negative" for consulting and IT services than for the wider AI trade, because investment that would have gone to consulting projects or IT work was instead allocated for AI hardware spend.

IBM's stock has dropped 26.7% in 2026, while the State Street Technology Select Sector SPDR ETF XLK has soared 27.5% and the S&P 500 index SPX has advanced 10.2%.

-Hannah Pedone -Tomi Kilgore

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07-14-26 1621ET