Shares of IBM plunged about 25 percent on July 14, the worst single-day decline in the company's history, after it pre-announced second-quarter results that fell well short of Wall Street's expectations. The drop erased a chunk of value that had taken the stock months to build and dragged on the Dow Jones Industrial Average, of which IBM is a member.
The scale is historic. IBM has traded on the New York Stock Exchange since 1916, and Tuesday's fall exceeded even its 23.7 percent drop on October 19, 1987 — Black Monday — which had stood as its worst day for nearly four decades. A quarter of the company's market value disappeared in a single session on the strength of a guidance revision, not a scandal or a failed product.
The warning itself was blunt. IBM said preliminary adjusted earnings came in at $2.93 a share on revenue of $17.2 billion, below the $3.01 and $17.86 billion analysts tracked by FactSet had penciled in. Chief executive Arvind Krishna attributed the miss to softness in the company's software and infrastructure businesses, saying clients had shifted spending toward hardware purchases — including the memory chips that have been in acute demand as data centers expand.
That explanation is the part with implications beyond IBM. If enterprise customers really are pulling money out of software and consulting to fund hardware, it complicates the prevailing narrative that recurring software revenue is the safe, high-margin core of big tech. IBM had spent years repositioning around software and AI consulting precisely to escape the lumpiness of hardware cycles; the warning suggests that pivot is now running into the same AI-infrastructure spending wave that has lifted chipmakers.
The rest of the market went the other way. The S&P 500 rose 0.38 percent to 7,543.59 and the Nasdaq Composite added 0.9 percent to 26,107.01, both buoyed by a June inflation report that came in cooler than expected: consumer prices rose 3.5 percent from a year earlier, below the 3.8 percent economists had forecast, and fell 0.4 percent on the month as energy prices pulled back. Traders trimmed the odds of a near-term Federal Reserve rate increase to roughly 15 percent from about 35 percent before the data.
Bank earnings added to the up day. Goldman Sachs jumped about 9 percent after beating expectations, while JPMorgan Chase and Bank of America each rose around 2 percent following their own second-quarter reports. The Dow, weighed down almost entirely by IBM, managed only a token gain of about 10 points to 52,508.27 — a gap between the index and its worst component that captures the day's split screen.
For IBM, the reckoning now shifts to its full quarterly report, when management will have to say whether the software weakness is a one-quarter air pocket or the start of a longer squeeze. The chart below shows how sharply the reversal came: after climbing above $306 a share earlier in the month, the stock is now trading near $216.