IBM stock price still in the 'penalty box' after epic 25% crash

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IBM's ( IBM ) stock is likely to stay in the penalty box for an extended duration after a shock profit warning.

Quick insight: Big Blue's stock crashed 25% on Tuesday , its worst day ever, dating back to 1961. The stock lost 23% in a single session in October 1987.

"I think that this is one that you're going to have to wait, and it's going to be in the penalty box for a while as they adjust their business," Globalt Investments senior portfolio manager Thomas Martin said on Yahoo Finance's Opening Bid (video above).

What's behind the move: IBM said it sees second quarter sales of $17.2 billion versus analyst estimates of $17.85 billion. Non-GAAP earnings are expected to be $2.93 compared to estimates of $3.02.

"When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter," IBM CEO Arvind Krishna said in a letter to investors. "Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this 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."

How did mainframe performance shortfall impact IBM's revenue?

He added, "In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. 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. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter."

Citi analyst Fatima Boolani: "In what we garner is now a likely wider-dispersion for 2026/2027 expectations, renewed and emboldened 'AI-disruptee/AI-loser' concerns, we anticipate shares to be tethered."

Goldman Sachs analyst James Schneider: "We believe the mainframe shortfall reflects client demand re-prioritization toward near-term server and other hardware purchases given surging memory and component prices, a dynamic consistent with what peers such as Dell and HP have cited. This reprioritization also drove a shortfall in Transaction Processing because of perpetual licenses tied to new mainframe purchases. In addition, we believe the company's Data & Automation software segment saw weaker demand due to company-specific execution issues."

The bottom line: IBM's stay in the penalty box is well-deserved. To get out, the company will have to stack several comeback quarters to regain investor trust.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the ' Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi , Instagram , and LinkedIn . Tips on stories? Email brian.sozzi@yahoofinance.com.

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Sinergia Empresarial continuará el seguimiento de esta información sobre iBM stock price still in the 'penalty box' after epic 25% crash y ampliará la cobertura conforme se confirmen nuevos elementos relevantes para el ecosistema empresarial.