IBM shares drop 17% after warning Q2 earnings missed targets
IBM shares dropped more than 17% on Tuesday after the company warned preliminary second-quarter earnings and revenue would miss Wall Street expectations. Adjusted earnings of $2.93 per share on $17.2 billion in revenue fell below analyst forecasts as clients shifted capital spending toward AI-related servers, storage, and memory hardware.
Key Takeaways
- IBM reported preliminary Q2 revenue of $17.2 billion, below the roughly $17.86 billion analysts expected.
- Adjusted earnings per share came in at $2.93 versus estimates near $3.01 to $3.02.
- Shares sank more than 17% in premarket trading Tuesday, with CNBC reporting losses as deep as 23% before the opening bell.
- CEO Arvind Krishna blamed a late-June capex shift, delayed large deals, and cybersecurity distractions.
- IBM scheduled a full earnings conference call for July 22, 2026, at 5 p.m. ET.
Why did IBM shares fall so sharply?
The selloff followed an unusually early profit warning ahead of IBM's scheduled July 22 earnings report. Investors had been watching whether the company's AI and hybrid-cloud bets could support its valuation. When preliminary figures landed below forecasts, traders repriced the stock quickly.
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What caused IBM to miss second-quarter estimates?
Chairman and CEO Arvind Krishna blamed weakness across software and infrastructure. In a letter to investors, he said that in the last few weeks of June, clients shifted quarterly capital spending toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.
IBM had anticipated some supply-chain impact but not the magnitude of the reprioritization. Krishna also cited rapidly evolving industry-wide cybersecurity concerns that distracted clients, along with numerous large deals that failed to close on expected timelines — factors he said drove the majority of the shortfall.
How weak were IBM's preliminary Q2 numbers?
The hardware, software, and consulting provider reported adjusted earnings of $2.93 a share on revenue of $17.2 billion. That trailed expectations for earnings of $3.01 a share and revenue of $17.86 billion, according to FactSet data cited by CNBC.
Reuters reported a similar gap using LSEG data, with adjusted EPS expected at $2.93 versus an estimate of $3.02. Reuters framed the miss as part of a broader industry-wide shift in technology spending toward AI infrastructure, reducing budgets available for traditional software.
What should IBM investors watch next?
IBM said it is still finalizing second-quarter financial reporting and that final results could differ slightly from Tuesday's preliminary release. Krishna acknowledged the company faltered in adapting quickly enough but expressed conviction in IBM's portfolio and strategic transformation.
Management promised new and accelerated initiatives to improve results. The next major checkpoint is the July 22 conference call, when IBM is expected to discuss full-year expectations in greater detail.