New York: IBM is staring at one of the biggest single-day losses in its 115-year history after CEO Arvind Krishna acknowledged that the technology giant failed to adapt quickly enough to the rapid shift in AI, triggering a sharp sell-off in the company’s shares and raising fresh concerns about its growth strategy.
The New York-headquartered company saw its stock plunge by nearly 25% after Krishna’s comments, putting IBM on course to lose almost $70 billion in market value. If the losses hold, the company’s valuation would fall significantly from approximately $272.78 billion, marking one of the steepest declines in its corporate history. The sharp downturn also weighed on broader technology stocks, with companies such as Microsoft, ServiceNow, Salesforce and Intuit registering declines ranging between 2% and 5%.
Speaking to investors, Krishna admitted that IBM had “faltered” and failed to “adapt and move quickly enough” as artificial intelligence reshaped customer priorities and enterprise technology spending. According to the company, several major business deals expected to close during the second quarter did not materialise because clients redirected their budgets toward AI infrastructure.
Krishna explained that during the final weeks of June, many enterprise customers shifted their quarterly capital expenditure toward purchasing servers, storage systems and memory hardware. Companies rushed to secure supply-constrained AI infrastructure before anticipated price increases, leaving less room in their budgets for software and other technology investments.
IBM said it had anticipated some disruption related to supply-chain challenges but underestimated the scale of the spending shift. The CEO noted that the rapid reprioritisation of customer budgets had a more significant impact on the company’s business than expected.
The warning has reinforced a broader trend emerging across the technology industry, where businesses are increasingly prioritising investments in AI infrastructure over traditional enterprise software. As organisations race to build AI capabilities, spending has shifted toward high-performance chips, networking equipment and data centre infrastructure, creating challenges for companies whose revenues rely heavily on software and consulting services.
The company is also expected to face weakness in its core mainframe business, which provides high-powered computing systems and software used by banks, airlines, governments and other large enterprises to process critical transactions. Analysts believe this slowdown reflects changing customer priorities rather than declining demand for enterprise technology overall.
Adding to the challenges, Krishna highlighted that cybersecurity has become an increasingly important area of spending as AI tools make cyber threats more sophisticated. Businesses are allocating larger portions of their technology budgets to security solutions designed to defend against increasingly advanced attacks.
IBM now expects second-quarter revenue of around $17.2 billion, representing growth of only about 1% compared to the previous year. The projection falls below analysts’ expectations of $17.86 billion, according to market estimates, raising concerns about the company’s near-term financial performance.
Market analysts described the development as an “ugly moment” for IBM, warning that prolonged customer preference for AI infrastructure and cybersecurity spending could continue to pressure software companies. They noted that while a temporary shift may be manageable, an extended slowdown could prompt investors to question the outlook for the broader enterprise software sector.
Despite the disappointing outlook, IBM reiterated its long-term strategic focus on expanding its high-margin Red Hat business, which enables customers to run applications across multiple cloud platforms. The company also emphasised its commitment to emerging technologies, including quantum computing, announcing plans to invest more than $10 billion toward building a large-scale quantum computer by 2029.
IBM has also entered into AI partnerships, including collaborations with OpenAI. However, these initiatives remain in their early stages and are not yet large enough to offset weakness in the company’s traditional software and infrastructure businesses.
