Is IBM Stock in Trouble?

IBM shares collapsed more than 25% after the company pre-announced second-quarter results that fell short of Wall Street targets. Revenue came in at $17.2 billion versus the $17.86 billion analysts expected, while adjusted earnings per share landed at $2.93 against a consensus estimate of $3.02.

The broader concern extends beyond the Q2 miss. IBM disclosed that customers are reallocating budgets away from its core software and mainframe products toward AI servers and memory infrastructure—a spending shift that threatens the company's traditional revenue streams. The guidance underscores near-term headwinds as enterprise IT dollars flow toward generative AI workloads that favor hyperscale cloud providers and semiconductor makers over legacy enterprise vendors.

The 25% single-session drop represents one of IBM's steepest declines in years and wipes out billions in market capitalization. The company had positioned its hybrid cloud and AI consulting services as growth engines, but the pre-announcement signals those efforts haven't yet offset weakness in its legacy business lines.