International Business Machines (IBM) shares fell 23% on July 14, 2026, following the release of preliminary second-quarter results that did not meet analysts' expectations. The company reported adjusted earnings of $2.93 per share on revenue of $17.2 billion, while analysts had anticipated earnings of $3.01 per share and revenue of $17.86 billion, according to FactSet.
CEO Arvind Krishna attributed the shortfall to a decline in the software and infrastructure business, noting that clients redirected their capital expenditures towards hardware purchases, including memory chips. In a letter to investors, Krishna stated, "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." He acknowledged that the company did not foresee the extent of this shift in spending.
Krishna also mentioned that the company struggled to adapt quickly enough, resulting in several large deals not closing as expected, which contributed to the earnings shortfall. In the previous quarter, IBM's software revenue had increased by 11% to $7.05 billion, leading to stronger-than-expected results with adjusted earnings of $1.91 per share.
The decline in IBM's stock comes amid concerns that advancements in artificial intelligence could disrupt the business models of major software companies. Krishna commented on the hesitance among clients regarding new deals, stating, "Mythos is making people pause to say, wait, how much do I need to spend on cyber? They're pausing on new deals until they know." He expressed confidence that IBM's software would not be disrupted by AI developments.