IBM shares plummeted 20% in premarket trading on Tuesday, signaling what analysts describe as a historic downturn for the technology giant. The sharp decline follows a preliminary earnings warning in which the company reported second-quarter sales of $17.2 billion, missing market expectations of $17.85 billion.
The company also projected non-GAAP earnings of $2.93 per share, failing to meet the $3.02 estimate anticipated by analysts. According to strategist Mike Zaccardi, the stock is on track for its worst single-day performance since 1961.
IBM CEO Arvind Krishna attributed the shortfall to a combination of weak Z-series mainframe performance and a decline in transaction processing software revenue. In a letter to investors, Krishna explained that the company encountered an unexpected shift in client behavior during the final weeks of June. Clients prioritized capital expenditure (capex) toward servers, storage, and memory hardware to mitigate supply chain constraints and hedge against anticipated price increases.
“These conditions require our teams to execute perfectly, and this quarter we faltered,” Krishna stated. He further noted that the company struggled to manage the magnitude of this capex reprioritization, compounded by industry-wide cybersecurity distractions that impacted client buying patterns throughout the quarter.