IBM reports preliminary Q2 revenue up 1% YoY to $17.2B, below $17.9B est., as CEO Arvind Krishna says customers are shifting spending to chips; IBM falls 25%
What's Next?Makenzie Holland /CIO Dive:IBM stock tumbles after Q2 infrastructure revenue warningDaniel Howley /Yahoo Finance:IBM stock plummets more than 25% on Q2 earnings warningIan Salisbury /Barron's Online:IBM Just Sent a Warning About DividendsAmanda Caswell /The New Stack:“We did not adapt and move quickly enough”: What IBM's earnings miss says about enterprise AI spendingTy Roush /Forbes:IBM Shares Crashed 25% In Worst Day Ever—Here's WhyNathan Bomey /Axios:This “will rattle many”: IBM s
BloombergAmy Thomson
Context & Ripple Effects
IBM had just reported stronger first-quarter growth, led by software, while keeping its full-year outlook. The preliminary second-quarter result interrupts that momentum: revenue grew modestly but missed expectations, and management tied the shortfall to customers prioritizing chip spending.
The company has also spent prior cycles navigating major platform transitions, including cloud, against a longer record of revenue pressure. This makes the current warning consequential not simply as an earnings miss, but as evidence that enterprise AI-related budgets may be reaching IBM unevenly.
First-order effects
IBM faces an immediate credibility and valuation hit after the preliminary revenue miss and the roughly 25% share-price drop, despite year-over-year revenue growth.
Customers’ reported shift toward chips diverts near-term budget from IBM’s infrastructure and software offerings, pressuring the businesses expected to benefit from enterprise AI spending.
Second-order effects
IBM will face pressure to show that its software and infrastructure portfolio can capture demand once customers move from buying AI compute to deploying it in production workloads.
Vendors more directly exposed to chips and AI infrastructure may receive a larger share of enterprise budgets in the near term, while enterprise software suppliers face longer sales cycles or more scrutiny on AI-related spending.
Third-order effects
If this budget sequencing persists, AI investment may concentrate first in compute capacity rather than broadly lifting incumbent enterprise IT vendors, widening the gap between hardware beneficiaries and companies selling the surrounding software and services.
The episode underscores that AI demand is not a uniform enterprise-spending tailwind: vendors’ results will increasingly depend on where they sit in the stack and how quickly they adapt offerings to customers’ deployment priorities.
The trend: Enterprise AI budgets are being allocated in stages, with spending on compute infrastructure potentially preceding broader purchases of enterprise software and services.
$IBM: Bad day after 2Q citing client capex shift to memory/hardware given supply constraints & price hikes. But mgmt poor execution on closing deals 2. Rare miss for Arvind Krishna whose stock +105% since he's been CEO. Debate: AI taking over software or just a timing issue.
IBM risks getting squeezed from both sides by AI. 1) IT budgets moving to AI infrastructure 2) AI could now cut software & consulting spend Anthropic research showed where this was headed over a year ago. 37% of Claude use was computer/math work (coding, debugging and [image]
$IBM Woah. IBM put out preliminary Q2 results...and they are not good. Revenue was $17.2B vs $17.86B expected, up 1% YoY. Consulting revenue was flat and infrastructure revenue was down 7% YoY. All the software names are down in sympathy to IBM basically saying that software [ima…
YESTERDAY JIM CRAMER TOLD HIS VIEWERS TO BUY $IBM SHARES TODAY IBM SHARES FELL 25% THE BIGGEST 1 DAY DROP IN THE COMPANY'S ENTIRE 100 YEAR HISTORY INVERSE CRAMER NEVER FAILS [image]
I spoke to IBM CEO Arvind Krishna about the warning today and here's what he told me: “A few large capex deals paused near the end of the quarter. It's not widespread. It's mainframe and the software associated with it....Mythos is making people pause to say, wait how much do I…
Brutal showing by IBM. The direct acknowledgment that clients have shifted AI capex spend toward core infrastructure — the question is how long the “reprioritization” lasts. [image]
$IBM CEO's letter along with the pre-announcement might be the most bearish news for SAAAS yet. Companies are pulling back on software spending to prioritize AI capex and cybersecurity. [image]
“...we did not anticipate the magnitude of the capex reprioritization.” Remember this sentence. It's going to be used by some company CEOs in the near future.
IBM's preliminary Q2 26 results fall short of its expectations CEO: “...we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter” $IBM: -17% Pre-Market [image…
$IBM released preliminary Q2 results BELOW internal expectations as mainframe and software sales disappointed, with large deals failing to close on expected timelines. CEO: “This quarter we faltered.” Revenue: $17.2B vs $17.86B est. 🔴, up 1% YoY Software: +5% Consulting: flat, [i…