IBM stock closes down more than 25% after preannounced earnings results
IBM stock closes down more than 25% after preannounced earnings results.
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IBM ( IBM ) ended trading Tuesday down more than 25%, its worst drop since at least 1968, after the company preannounced earnings that fell well below Wall Street's expectations.
Big Blue attributed the results to customers shifting spending away from software and mainframe products and toward AI servers and memory.
Analysts had expected IBM to report adjusted earnings per share (EPS) of $3.02 on revenue of $17.86 billion, but the company came up short, posting adjusted EPS of $2.93 and revenue of $17.2 billion.
In a statement, IBM CEO Arvind Krishna said the company was prepared for a low-single-digit decline in its z17 mainframe business for the quarter, but the results were far worse than projected and are at least partially related to the global memory shortage.
"In the last few weeks of June, we saw clients shift their quarterly [capital expenditures] spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases," Krishna said.
"This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization," he added.
IDC's Ashish Nadkarni , who leads the firm's enterprise infrastructure global research group, wrote in a note that Wall Street's reaction to Krishna's warning was likely stronger than warranted, but that investors shouldn't dismiss his statement.
"It may not mean the collapse of the mainframe business, but it does mean that IBM is not isolated from the strategic reallocation of enterprise budgets in order to address the acceleration of AI adoption," he explained.
IBM stock was previously off just 4.8% since the start of the year heading into Tuesday, but it is now off 26%.
The company's chief competitors aren't faring much better. Shares of Oracle ( ORCL ) are off 33% year to date, while Microsoft has declined 20%. Accenture ( ACN ), meanwhile, is down 50%.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X at @DanielHowley .
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