International Business Machines (IBM) saw its stock plummet over 23% in pre-market trading on July 14, 2026, after releasing preliminary second-quarter results that fell short of Wall Street expectations. The sharp decline, which placed the stock on track for one of its worst trading days in decades, sent ripples across the software and broader IT sector.
CEO Arvind Krishna acknowledged that the company "faltered" in the quarter, attributing the shortfall to clients redirecting capital expenditures towards servers, storage, and memory purchases. This shift was driven by a global memory supply shortage and anticipated price increases, prompting customers to prioritize hardware acquisition, particularly for AI infrastructure. Krishna noted that while IBM had anticipated some supply chain impacts, the magnitude of this capital expenditure reprioritization was unexpected. Furthermore, several large software deals failed to close within the expected timelines, contributing to the revenue miss.
The impact extended beyond IBM, with other software and IT services firms experiencing significant declines. The iShares Expanded Tech-Software Sector ETF dropped over 4%, reflecting broad weakness across the industry. Companies like Salesforce, Microsoft, Accenture, and Cognizant also saw notable drops in their stock prices as investors digested the implications of IBM's warning. This development has fueled concerns that the burgeoning AI spending boom, while benefiting chipmakers, may be negatively impacting traditional software and services segments as companies reallocate budgets. IBM is scheduled to release its full second-quarter earnings report on July 22, 2026.
