In a few hours, roughly USD 67 billion of the company’s value simply vanished. To put that in plain terms, IBM lost more wealth in one afternoon than most large companies are worth in total.

The trigger looked small on paper. IBM warned that its April-to-June sales came in at USD 17.2 billion, about USD 700 million short of what Wall Street expected. A shortfall of that size does not usually erase tens of billions in value. So why did investors react as if the building were on fire?

The answer is that a share price does not reflect one bad quarter but what people believe about all the quarters still to come. And on that Tuesday, a lot of people quietly changed their minds about IBM’s future. The miss was the moment the symptoms became impossible to ignore.

Why the fall felt so shocking
For most of the last century, IBM was not just a technology company. It was the technology company. There is a famous saying in corporate life that “nobody ever got fired for buying IBM.” It built the machines that ran banks, governments, airlines and insurers.

Its mainframe computers still quietly power a huge share of the world’s card payments and financial systems today. When a name carries that much history and trust, a crash of this scale feels almost unthinkable. Giants are not supposed to fall 25% in an afternoon.

There was a second reason for the shock. IBM had actually been having a decent run. Only weeks earlier, in June, the stock had touched an all-time high above USD 329. Its own management had promised strong growth in its most profitable business, software.

So when the warning landed, it did not just disappoint. It contradicted the story the company had been telling.

IBM’s chief executive, Arvind Krishna, admitted as much in a blunt letter to investors, writing that the company had faltered, had not moved quickly enough, and had watched several large deals slip away. When a boss says that out loud, markets listen.

Why it was also entirely predictable
Here is the uncomfortable truth. If you stopped staring at the recent share price and looked at the longer picture, this was not a bolt from the blue. It was a slow drift finally catching up with reality.

Consider the numbers over ten years. An investor who put money into IBM earned a little under 8% a year. The same money in a simple fund tracking the wider US market earned close to 15% a year. Over a decade, that gap is enormous. It means IBM was steadily losing the race long before anyone panicked.

The clearest illustration is the comparison with Nvidia, the chipmaker now at the centre of the AI boom. Back in 2014, IBM was worth roughly eighteen times more than Nvidia. Today the roles are almost perfectly reversed, with Nvidia worth many times more than IBM.

IBM’s value barely moved across those years while a former minnow became one of the most valuable companies on earth. That is the visual definition of an industry laggard. The world raced ahead. IBM largely stood still.

The warning signs were already flashing
This year alone had offered two clear rehearsals for July. In late February, the stock dropped more than 13% in a day, its worst session in a quarter of a century, after the AI firm Anthropic showed that its tools could modernise COBOL, the ageing programming language that runs on IBM mainframes.

That mattered because updating those old systems is exactly the kind of slow, expensive work IBM’s consultants are paid billions to do.

If a cheap AI tool can do it faster, one of IBM’s most profitable jobs is suddenly at risk. Then in April, IBM’s consulting arm barely grew while its automation software grew ten times faster, a quiet sign that customers increasingly want ready-made AI tools rather than armies of advisers.

In short, the very technology IBM was selling as its future was also eating into its present. Anyone paying attention had seen this film before. July was simply the loudest screening yet.

Falling behind in the race that mattered most
The most damaging place to fall behind was artificial intelligence, and this is where IBM’s story turns almost tragic. IBM was early to AI. In 2011 its Watson system beat human champions on the quiz show Jeopardy! and, for a moment, Watson was shorthand for machine intelligence itself. IBM had the lead, the brand and the attention.

Then it lost the thread. Watson never found a clear, money-making purpose and quietly faded. When the current wave of AI arrived, the momentum belonged to others.

Microsoft, Google and Amazon poured resources into cloud computing and AI at a scale IBM could not match, and those three now dominate the market where modern software lives. Newer names such as OpenAI became household words.

IBM rebuilt its offering under the name watsonx and made sensible, grown-up bets on trust, governance and helping big companies use AI safely. It even partnered with AI firms like Anthropic to strengthen its tools.

But in the fight for actual market share, watsonx remains a small player, holding only a low-single-digit slice of the AI tools market. Being sensible is not the same as being a leader.

The final irony
The specific reason for July’s crash captures IBM’s predicament perfectly. Krishna explained that customers had stopped spending on IBM’s software and services and were instead rushing to buy hardware, servers, storage and memory chips, to prepare for the AI wave.

Prices for those components have been climbing fast because AI data centres are consuming them in vast quantities.

Read that again slowly. IBM’s customers were spending heavily on the AI boom. They were just not spending it with IBM.

The gold rush was happening all around, and IBM was left selling shovels that fewer people wanted. Some analysts noted that this explanation might be a little convenient for management, since it points the finger at the wider industry rather than at IBM’s own execution.

Either way, the message was the same. When the biggest spending wave in a generation arrives and your revenue goes backwards, the problem is not the wave.

What it means
None of this makes IBM worthless. It still generates enormous amounts of cash, pays a dependable dividend it has raised for more than thirty years, and owns critical systems the world genuinely relies on.

For income-focused investors, there is a real case that the stock is now cheap. A securities investigation and shareholder lawsuits now hang over the company, and its full results on 22 July will be watched closely, but the business is not about to disappear.

The deeper lesson is about how decline actually works. It rarely arrives as a single dramatic event and often builds quietly, as one missed opportunity at a time, while the brand and the balance sheet keep everyone comfortable.

IBM’s crash felt sudden because the share price had been polite about the truth for years. The 25% drop was not the moment IBM fell behind. It was simply the moment the market finally admitted to that fact.

The post IF Insights: Why IBM’s stock market crash wasn’t really surprising appeared first on International Finance.

The drop outpaced even the company’s previous worst day, a 23.7% fall on 19 October 1987, and wiped out roughly USD 68.8 billion in market value in a single session.

IBM’s trading records only go back to 1968, but the company has actually been listed on the New York Stock Exchange (NYSE) since 1916, meaning this is the worst single day in more than a hundred years of trading history for the stock.

Just eight days earlier, on 6 July, Bank of America had raised its price target on IBM to USD 330, and the stock had closed the prior session at USD 290.23, not far off a recent high of USD 332.46. That optimism made the reversal all the more jarring for investors who had been betting on continued strength.

IBM issued its warning ahead of its scheduled earnings date, a move known on Wall Street as a preannouncement. The company said second-quarter revenue would come in at USD 17.2 billion, missing analyst forecasts of USD 17.86 billion, while adjusted earnings per share of USD 2.93 fell short of the expected USD 3.01. GAAP earnings per share came in around USD 2.27, a 2% decline from a year earlier, and pretax income margin slipped to roughly 14.4%, down 90 basis points.

Software revenue still grew 5% and consulting held roughly steady, but the infrastructure business, which includes IBM’s mainframe hardware, slid 7%. The swing looks especially sharp against the first quarter of 2026, when software revenue had actually grown 11% to USD 7.05 billion.

In a letter to investors, chief executive Arvind Krishna explained that clients had suddenly redirected spending away from software and consulting in the final weeks of June, choosing instead to buy servers, storage and memory chips before an expected wave of price increases.

Krishna said the company had not adapted quickly enough and that a number of large deals failed to close on schedule as a result. He had flagged as far back as April that the second quarter would involve completing the rollout of IBM’s new z17 mainframe, an AI-capable system, though he acknowledged the company had not anticipated the scale of the spending shift this triggered.

Behind that shift sits a broader problem gripping the tech industry, a severe global shortage of memory chips. Major chipmakers such as Samsung, SK Hynix and Micron have redirected production toward the specialised chips used in AI data centres, leaving less capacity for the everyday memory used in ordinary servers, PCs and phones. That squeeze has pushed prices up and prompted many companies to buy hardware early.

IBM’s fall rattled the wider software sector too. Salesforce dropped 4% and Microsoft fell almost 3% the same day, while the IGV software ETF, which tracks a broad basket of software companies, slipped 2%.

Analysts noted that IBM’s revenue miss, at under 4%, was fairly modest, but the size of the share price reaction reflects how highly valued the stock had become beforehand, trading at roughly 23 times forward earnings just before the warning.

In the aftermath, the stock traded around USD 219.50, with a relative strength index of just 19, a level technically considered very oversold, and analysts pegged near-term support at USD 213.28.

The episode has split opinions. Some analysts see it as a company-specific execution stumble tied to a temporary memory chip shortage. Others read it as an early sign that spending on AI infrastructure is starting to eat into traditional enterprise software and consulting budgets more broadly, not just at IBM.

IBM is due to report its full second-quarter results on 22 July 2026, which should clarify whether the lost revenue was simply delayed into the next quarter or reflects a genuine slowdown in demand.

In the meantime, HSBC has already cut its rating on the stock to “Reduce,” with a lowered price target of USD 191, suggesting some analysts expect the pressure on IBM’s traditional software and consulting business to continue s rating on the stock to “Reduce,” with a lowered price target of USD 191, suggesting some analysts expect the pressure on IBM’s traditional software and consulting business to continue.

The post With a 25% downfall, IBM shares suffer worst day after earnings warning appeared first on International Finance.