IBM shares skid more than 20% after company warns second-quarter earnings fell short of expectations

IBM shares plunged more than 20% Tuesday after the company issued preliminary second-quarter results warning that earnings would miss expectations. CEO Arvind Krishna attributed the shortfall to weakness in IBM's software and infrastructure segments, as clients redirected spending toward hardware purchases instead.

The double-digit drop marks one of the steepest single-day declines for the tech giant in recent years. The earnings warning caught Wall Street off guard, with the shift in customer spending patterns creating an unexpected revenue mix problem. While hardware sales benefited, the higher-margin software and infrastructure businesses—key drivers of IBM's transformation strategy—took the hit.

The preliminary results suggest IBM's pivot to cloud and hybrid infrastructure may be hitting headwinds as enterprise clients adjust their capital allocation. The company has positioned software and services as growth engines, making the weakness in these segments particularly concerning for the stock's premium valuation.

The 20%-plus selloff wipes out months of gains and pushes IBM closer to key technical support levels that could determine whether the decline accelerates or stabilizes.