NEW YORK, July 19, 2026, 09:05 EDT
- International Business Machines NYSE:IBM finished Friday at $212.67, falling 26.0% over the week. U.S. cash markets remain closed Sunday.
- Second-quarter preliminary revenue was around $660 million below consensus estimates. Adjusted earnings were nine cents per share under expectations.
- IBM will announce final results and address its full-year forecast on Wednesday at 5 p.m. EDT.
IBM shares plunged in their biggest single-day fall on record, wiping out around $69 billion in market value. The loss was about 100 times greater than the initial quarterly revenue shortfall. Investors adjusted IBM’s long-term growth outlook, not just responding to a single disappointing quarter.
The stock dropped 25.2% on Tuesday, marking its biggest single-day loss on record. By the end of the week, it was down 26.0% overall after slipping another 2.9% on Friday.
IBM’s main growth area saw a slowdown. Software revenue increased by 5%, compared to an 11% gain in the previous quarter. Infrastructure turned from 15% growth to a 7% fall.
The shift is apparent in five different metrics. The data is based on IBM filings, LSEG consensus, and Dow Jones market data.
| Indicator | Q2 result or market move | Benchmark | Gap |
|---|---|---|---|
| Revenue | $17.20 billion | $17.86 billion consensus | $660 million below, or 3.7% lower |
| Adjusted EPS | $2.93 | $3.02 consensus | $0.09 under, or 3.0% shortfall |
| Software growth | 5% | 11% in Q1 | Down 6 percentage points |
| Infrastructure growth | −7% | 15% in Q1 | Lower by 22 percentage points |
| Equity value lost Tuesday | About $69 billion | About $660 million sales miss | Nearly 100-fold |
All figures for the second quarter are still preliminary. IBM stated that final results may vary slightly as financial reporting is concluded.
Chief Executive Arvind Krishna stated that clients shifted their spending to servers, storage and memory. Buyers looked for limited equipment ahead of anticipated price hikes. As a result, several large deals failed to meet IBM’s scheduled closing timeline.
“This quarter we faltered,” Krishna said. He added that IBM failed to respond rapidly enough. SEC
Performance varied across segments. Red Hat revenue increased by 11%, and distributed infrastructure surged 37%. The segment ended June with roughly $500 million in backlog. Consulting revenue held steady, though signings kept rising.
Margins reflected the impact of the less favorable mix. Operating gross margin slipped 70 basis points to 59.4%. However, operating pretax margin increased 30 basis points, supported by productivity gains.
Brian Mulberry, senior market strategist at Zacks Investment Management, described the budget change as “not just a wrench, it’s like a hammer.” Bloomberg Intelligence analyst Anurag Rana warned that weak software bookings may appear in upcoming reports. Jefferson City News-Tribune
IBM has invested upwards of $50 billion in acquisitions since 2018, targeting firms such as Red Hat, HashiCorp and Confluent to reinforce a software-focused model. The second-quarter downturn is now challenging the resilience of that approach.
Cash flow provides some support, but it does not answer the growth question.
IBM reported free cash flow of $4.76 billion for the first half of the year. Its earlier full-year projection suggested approximately $15.7 billion, indicating around $10.9 billion expected in the second half. IBM has not reiterated this goal since its warning.
Wednesday brings the next test. Investors are looking for updates on the timeline for delayed deals and on transaction-processing software. The outlook for full-year revenue and cash flow is expected to be more significant than minor adjustments to the preliminary quarter.
Risks: The surge in hardware demand could be short-lived, potentially freeing up capital for postponed software spending. Prolonged pressure might erode IBM’s revenue balance and test its strategy built on acquisitions. Final second-quarter results are subject to revision.
U.S. markets resume trading on Monday. IBM, priced at $212.67, trades at roughly 18.8 times its trailing earnings. The stock is less expensive, though not valued as if it were a failing firm. The focus shifts to Wednesday.
Related articles: NYSE:IBM
