- IBM shares plunged up to 25% on Tuesday after missing Q2 earnings expectations, marking the company’s worst single-day drop in decades.
- Revenue came in at $17.2 billion, below analyst estimates of $17.85 billion, with non-GAAP earnings of $2.93 per share versus the $3.02 forecast.
- CEO Arvind Krishna acknowledged the company failed to adapt quickly enough as customers redirected technology budgets toward AI infrastructure.
- HSBC and Morgan Stanley assigned sell and hold ratings, respectively, following the earnings miss and lowered forecasts.
IBM shares plummeted as much as 25% on Tuesday after the company posted weaker-than-expected preliminary Q2 earnings on Monday, marking the tech giant’s worst single-day drop in decades. The stock sank to nearly $210 from the $280 price level, triggering significant analyst downgrades and concerns over the company’s strategic direction in AI infrastructure.
The company reported revenues of $17.2 billion, falling short of analyst expectations of $17.85 billion. Consequently, non-GAAP earnings came in at $2.93 per share compared to estimates of $3.02, while IBM also shared lower-than-expected forecasts for the next quarter and the remaining fiscal year.
CEO Arvind Krishna acknowledged the missteps in a letter to investors. “This quarter we faltered,” he wrote, adding that IBM “did not adapt and move quickly enough” as customers redirected technology budgets toward AI servers, storage, and memory. Krishna noted that while the company expected some supply-chain disruption, it underestimated how dramatically customers would shift their spending.
Meanwhile, on The Street, the average price target for IBM stock remains at $303.83, representing a 39.37% increase from current levels. However, that is lower than last week’s forecasts, and with HSBC assigning a sell rating and Morgan Stanley a hold rating, the earnings miss could weigh heavily on investors’ minds over the next month.
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