IBM shares tumbled about 25% on Tuesday, the worst single trading day in the company's history, according to CNBC, after the technology giant took the unusual step of pre-announcing that its second-quarter results had fallen short of Wall Street's expectations. The drop was steeper even than IBM's fall on Black Monday in October 1987.
The miss
In the preliminary figures, IBM reported adjusted earnings of about $2.93 a share on revenue of roughly $17.2 billion, below the $3.02 a share and $17.86 billion analysts had expected, per CNBC. The gap looks small on paper, but for a company as steady and closely modeled as IBM, an unexpected shortfall of that kind is enough to shake investor confidence, and it did.
Why it happened
The explanation was not weak demand for technology, but a shift in what customers were buying. Chief executive Arvind Krishna said that in the final weeks of June, clients abruptly redirected their spending toward servers, storage and memory chips, racing to lock in supply-constrained hardware before prices rose further, according to CNBC. That pull toward hardware came at the expense of the software and services where IBM makes much of its money, and the company acknowledged it had underestimated how sharp the swing would be.
In other words, budgets that IBM expected to flow into its higher-margin products were diverted, at short notice, into buying physical kit while it was still available.
The memory squeeze behind it
The rush traces back to a shortage rippling out from artificial intelligence. Memory makers such as Samsung, SK Hynix and Micron have been steering production toward the high-bandwidth memory that AI systems devour, with SK Hynix's output described as essentially sold out for 2026, according to Tom's Hardware. That reallocation has tightened supply and lifted prices for the more ordinary memory used across corporate computing, giving companies a reason to buy now rather than wait.
IBM's stumble is an early, concrete example of how that chip crunch can reach beyond the chipmakers themselves, reshaping the quarterly results of firms that sell software and services on top of the hardware.
What to watch
The read-across worried investors in other enterprise-software names on the day, as commentary framed the episode as hardware spending crowding out software, per MarketWatch. The open question is whether this is a timing problem, spending merely delayed a quarter, or a more lasting shift in how companies split their technology budgets while chips are scarce.
IBM is due to report full second-quarter results, with detail by business line, on July 22. Those numbers should help show whether the software demand simply slipped into a later quarter or was cut, and whether IBM's warning was a company-specific stumble or a preview of pressures other technology suppliers will feel too. Boursel will report those results rather than guess at them.
