IBM just had the kind of day that makes investor relations teams update their resumes. The 113-year-old tech giant watched its stock plunge by as much as 25% on July 14 after releasing preliminary second-quarter results that told a story Wall Street really didn’t want to hear: enterprise customers are redirecting their budgets away from high-margin software and consulting toward physical AI infrastructure.
The numbers paint a clear picture. IBM posted preliminary Q2 2026 revenue of $17.2 billion, a mere 1% increase year-over-year. Adjusted earnings per share came in at $2.93, missing analyst consensus estimates of roughly $3.01.
The great hardware land grab
CEO Arvind Krishna explained in a letter to investors that enterprise customers are aggressively shifting capital expenditures toward AI-related hardware: servers, storage systems, and memory chips. Supply constraints and projected price hikes on these components have created a “buy now or pay more later” dynamic that’s forcing CIOs to reshuffle their budgets.
Krishna acknowledged that while some supply-chain disruption was anticipated, the sheer scale of the spending pivot in late June caught the company off guard. IBM’s infrastructure segment revenue fell 7% year-over-year, creating what he described as a “cascade of weaker performance” across the business.
