The tech giant's stock took a historic hit as quarterly results came in below Wall Street consensus, raising questions about ripple effects across risk assets including crypto.
IBM shares plunged 25% on Tuesday after the technology company released preliminary second quarter results that fell short of Wall Street expectations.
The stock traded near $218, putting IBM on track for its largest single day decline on record and wiping roughly $70 billion from its market value. The drop was set to exceed the decline recorded during the 1987 Black Monday crash.
IBM expects to report second quarter revenue of $17.2 billion, up 1% from the previous year but below the $17.86 billion analysts expected. Adjusted earnings are projected at $2.93 per share, compared with the consensus estimate of $3.02.
The company said software revenue increased 5%, while consulting revenue was flat and infrastructure revenue declined 7%. Adjusted earnings per share rose 5% from the previous year.
IBM CEO Arvind Krishna attributed the shortfall to customers redirecting spending toward servers, storage and memory products during the final weeks of June.
Companies moved to secure infrastructure facing limited supply before anticipated price increases, delaying purchases of IBM software and mainframe products. Numerous large deals also failed to close within the expected quarter.
“This quarter we faltered,” Krishna said in a letter to investors, adding that IBM did not adapt quickly enough to the changing spending environment.
The weakness was concentrated in IBM’s mainframe business and its related software products, particularly transaction processing.
The company had already expected infrastructure revenue to decline as sales from the launch of its z17 mainframe began to normalize, but the decline was larger than anticipated.
Despite the shortfall, Red Hat revenue growth accelerated to 11%, while distributed infrastructure revenue increased 37% and ended the quarter with a backlog of approximately $500 million. IBM also said its recent HashiCorp and Confluent acquisitions delivered strong results.
The selloff spread across the software sector, with Microsoft, ServiceNow, Salesforce and Intuit falling between 2% and 5%.
IBM will release its complete second quarter results and discuss its full year outlook on July 22. The company cautioned that its final figures could differ slightly as it completes its financial reporting process.
