IBM share price crash: Worst stock slump in over 58 years; $70 bn wiped out - What went wrong?
In a letter to shareholders, IBM Chairman and Chief Executive Officer Arvind Krishna acknowledged that the company had failed to respond quickly enough to changing market dynamics.
- Jul 15, 2026,
- Updated Jul 15, 2026 9:44 AM IST
IBM shares plunged 25% on Tuesday, marking the company's steepest single-day decline in nearly 58 years, after the technology giant issued weaker-than-expected preliminary results for the second quarter and flagged an unexpected shift in customer spending. The selloff wiped out an estimated $67 billion-$70 billion in market value in a single trading session, according to Bloomberg. Founded in 1911, IBM reported that revenue for the quarter ended June increased just 1% year-on-year to $17.2 billion, falling short of investor expectations.
In a letter to shareholders, IBM Chairman and Chief Executive Officer Arvind Krishna acknowledged that the company had failed to respond quickly enough to changing market dynamics.
"We faltered and did not adapt and move quickly enough," Krishna wrote.
AI infrastructure spending reshapes customer budgets
IBM said an industry-wide surge in artificial intelligence infrastructure investments significantly altered enterprise spending patterns during the quarter.
As technology companies raced to expand AI capabilities, demand for servers, storage systems and memory chips surged, pushing up prices and creating supply constraints across the hardware ecosystem.
According to IBM, many large enterprise customers accelerated purchases of servers, storage equipment and memory products toward the end of June to secure inventory before anticipated price increases.
This shift diverted spending away from IBM's higher-margin offerings, particularly its mainframe systems—used extensively by banks, governments and large enterprises for mission-critical transaction processing—as well as related software products.
Krishna said the company had anticipated some impact from supply-chain disruptions but underestimated the scale of customers' capital expenditure reallocation.
"In the last few weeks of June, we saw clients shift their quarterly capital expenditure toward servers, storage and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. While we expected some supply-chain-related impact, we did not anticipate the magnitude of the capex reprioritisation," he said.
The company's infrastructure division, which includes its flagship mainframe business, reported a 7% decline in revenue during the quarter. Meanwhile, software revenue rose 5%, although the growth still fell below market expectations.
Cybersecurity spending takes priority
IBM also said rising cybersecurity concerns further influenced customer spending decisions during the quarter.
According to Krishna, enterprises increasingly prioritised investments in cybersecurity as rapid advances in artificial intelligence made cyber threats more sophisticated and harder to defend against.
The company highlighted growing industry concern following the launch of Anthropic's Mythos AI model, which reportedly demonstrated advanced capabilities in identifying vulnerabilities across computer networks, prompting organisations to strengthen their cyber defences.
As a result, many businesses redirected technology budgets toward cybersecurity initiatives, delaying or scaling back previously planned infrastructure and software projects.
Investor enthusiasm for the cybersecurity sector surged following the development. Shares of CrowdStrike climbed about 12%, while Okta and Netskope gained roughly 11% each, reflecting expectations of stronger demand for cybersecurity products and services.
IBM shares plunged 25% on Tuesday, marking the company's steepest single-day decline in nearly 58 years, after the technology giant issued weaker-than-expected preliminary results for the second quarter and flagged an unexpected shift in customer spending. The selloff wiped out an estimated $67 billion-$70 billion in market value in a single trading session, according to Bloomberg. Founded in 1911, IBM reported that revenue for the quarter ended June increased just 1% year-on-year to $17.2 billion, falling short of investor expectations.
In a letter to shareholders, IBM Chairman and Chief Executive Officer Arvind Krishna acknowledged that the company had failed to respond quickly enough to changing market dynamics.
"We faltered and did not adapt and move quickly enough," Krishna wrote.
AI infrastructure spending reshapes customer budgets
IBM said an industry-wide surge in artificial intelligence infrastructure investments significantly altered enterprise spending patterns during the quarter.
As technology companies raced to expand AI capabilities, demand for servers, storage systems and memory chips surged, pushing up prices and creating supply constraints across the hardware ecosystem.
According to IBM, many large enterprise customers accelerated purchases of servers, storage equipment and memory products toward the end of June to secure inventory before anticipated price increases.
This shift diverted spending away from IBM's higher-margin offerings, particularly its mainframe systems—used extensively by banks, governments and large enterprises for mission-critical transaction processing—as well as related software products.
Krishna said the company had anticipated some impact from supply-chain disruptions but underestimated the scale of customers' capital expenditure reallocation.
"In the last few weeks of June, we saw clients shift their quarterly capital expenditure toward servers, storage and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. While we expected some supply-chain-related impact, we did not anticipate the magnitude of the capex reprioritisation," he said.
The company's infrastructure division, which includes its flagship mainframe business, reported a 7% decline in revenue during the quarter. Meanwhile, software revenue rose 5%, although the growth still fell below market expectations.
Cybersecurity spending takes priority
IBM also said rising cybersecurity concerns further influenced customer spending decisions during the quarter.
According to Krishna, enterprises increasingly prioritised investments in cybersecurity as rapid advances in artificial intelligence made cyber threats more sophisticated and harder to defend against.
The company highlighted growing industry concern following the launch of Anthropic's Mythos AI model, which reportedly demonstrated advanced capabilities in identifying vulnerabilities across computer networks, prompting organisations to strengthen their cyber defences.
As a result, many businesses redirected technology budgets toward cybersecurity initiatives, delaying or scaling back previously planned infrastructure and software projects.
Investor enthusiasm for the cybersecurity sector surged following the development. Shares of CrowdStrike climbed about 12%, while Okta and Netskope gained roughly 11% each, reflecting expectations of stronger demand for cybersecurity products and services.