IBM Shares Plunge 25% After Profit Warning, Worst Drop in History

IBM shares fell 25% on July 14, 2026, after CEO Arvind Krishna warned that preliminary second-quarter revenue of $17.2 billion missed expectations by about $660 million. The drop is the largest single-day decline in the company's 115-year history, surpassing the 23.7% fall on Black Monday 1987 Source: CNN.

What happened

Krishna issued an unusual early earnings alert, citing a rapid shift in customer spending toward AI infrastructure. In a letter to investors, he admitted: "This quarter we faltered. We did not adapt or move quickly enough" Source: Infobae. The company's infrastructure division, including mainframes, saw revenue fall 7% year-over-year, while software grew only 5%, below forecasts Source: Clarín.

• Revenue: $17.2 billion, up 1% year-on-year (estimated $17.86 billion) Source: Milenio.
• Earnings per share: $2.93, vs. consensus of $3.02 Source: Infobae.
• Red Hat's unit revenue rose 11%, while non-mainframe server and storage grew 37% Source: Clarín.

Why it happened

Krishna attributed the miss to customers diverting budgets to "servers, storage and memory" for AI, fearing price hikes and shortages Source: El Confidencial. The scramble for chips and hardware pulled spending away from IBM's higher-margin mainframes and software. Additionally, cybersecurity concerns around Anthropic's Mythos model disrupted deals Source: CNN.

• Clients rushed to secure AI infrastructure, cannibalizing traditional IT spending Source: El Mundo.
• IBM's new z17 mainframe launch underperformed expectations Source: Portafolio.

Market fallout

The warning triggered a sell-off across the tech sector. Software stocks like ServiceNow, Workday, and Adobe fell 3-5%, while semiconductor makers like SK Hynix and Micron rose on AI demand Source: CNN, El Mundo. The ETF for software is down 12% year-to-date, while the Philadelphia Semiconductor Index is up 78% Source: Clarín.