Summary (tl;dr)

IBM's stock is trending due to a preliminary Q2 2026 earnings report that revealed revenue and profit below Wall Street expectations, largely because clients shifted spending towards AI infrastructure hardware over traditional software and mainframe systems.

Essential Background

IBM, a global technology and consulting company, has been undergoing a transformation focused on hybrid cloud and artificial intelligence (AI) to drive growth. Historically, IBM's mainframe programs, like the z17, have been significant contributors to its infrastructure revenue. The company last reported its Q1 2026 earnings in April, exceeding analysts' expectations.

The Full Story

On July 14, 2026, International Business Machines Corporation (IBM) unexpectedly released preliminary results for its second quarter, eight days ahead of its scheduled full earnings report. The preliminary report indicated a revenue of $17.2 billion, a 1% increase year-over-year, and operating (non-GAAP) diluted earnings per share of $2.93, up 5%. These figures fell short of analyst expectations, who had projected $17.86 billion in revenue and $3.01 or $3.02 in EPS.

IBM CEO Arvind Krishna attributed the shortfall primarily to clients redirecting their capital expenditure (capex) in the final weeks of June. Customers prioritized securing supply-constrained servers, storage, and memory for AI data centers in anticipation of price increases, leading them to delay or reduce spending on IBM's software services and traditional infrastructure, including its Z systems. Krishna acknowledged that IBM "faltered" by not adapting quickly enough to this significant shift in client buying patterns, and several large deals failed to close as expected.

Why It Matters

This preliminary earnings warning sent IBM's stock plummeting by over 20-25% on July 14, 2026, marking one of its largest single-day declines in its 115-year history. The significant drop erased approximately $65-67 billion from IBM's market capitalization. The news also caused a ripple effect, with shares of other major software and consulting companies, such as Microsoft, Salesforce, and ServiceNow, experiencing declines, as investors grew concerned about the broader impact of AI infrastructure spending on the enterprise software sector. This trend highlights a potential shift in technology spending, where investments are heavily favoring AI-related hardware over traditional software solutions, posing a challenge for companies like IBM that rely on software and services.

Geographic Location

• Armonk, New York, United States (origin of preliminary Q2 2026 earnings report and investor letter)