IBM just had the kind of day that makes investor relations teams update their resumes. The company issued a preliminary earnings warning for its second quarter of 2026, reporting revenue of $17.2 billion, a modest 1% year-over-year increase that missed analyst expectations by roughly $660 million to $700 million. The stock responded by falling approximately 25%, erasing tens of billions in market value in a single session.
It’s IBM’s worst single-day decline in decades.
The AI spending squeeze
CEO Arvind Krishna pointed to a specific culprit: enterprises are redirecting their capital expenditure budgets toward AI hardware infrastructure. The companies that buy IBM’s mainframes and enterprise software are now funneling those same dollars into GPUs, AI servers, and the data center buildouts required to run large language models.
The result was ugly across multiple business lines. Infrastructure revenue dropped 7% compared to the prior year. Transaction-processing software also came in weaker than expected. Adjusted earnings per share landed at $2.93, missing the consensus estimate of roughly $3.01 to $3.02.
