IBM Stock Plunges 25% on July 14 as Q2 Earnings Miss Targets

IBM stock plummeted 25% to $217.07 on July 14, marking its worst trading day in at least 58 years. The company preannounced second-quarter results showing adjusted earnings of $2.93 per share on revenue of $17.2 billion, both falling short of analyst expectations of $3.01 per share and $17.86 billion. CEO Arvind Krishna blamed the miss on customers abruptly shifting capital spending toward AI servers and memory chips to secure supply-constrained hardware ahead of expected price increases.

What IBM’s earnings miss reveals about the AI spending shift

IBM’s infrastructure division, which includes mainframe computers, fell 7% as clients reprioritized spending. In a letter to investors, Krishna said the company anticipated some supply chain impact but underestimated how dramatically customers would reallocate budgets. “We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected,” Krishna wrote. IDC analyst Ashish Nadkarni noted the market reaction may be sharper than warranted but cautioned that IBM faces real headwinds from enterprise budget reallocation toward AI adoption.

The scale of IBM’s worst day on record

The 25% drop erased $400 million in value from the 401(k) retirement accounts of nearly 150,000 IBM employees holding company stock. This surpassed IBM’s previous worst day of October 19, 1987, when shares fell 23.7%. IBM stock is now down 26% year to date after starting 2026 off just 4.8%. The company’s infrastructure revenue decline stands in sharp contrast to its software division, which grew 11% in the first quarter to $7.05 billion.

Competitors face similar AI-driven headwinds

IBM is not isolated in struggling with the shift to AI infrastructure spending. Oracle shares are off 33% year to date, while Microsoft has declined 20% and Accenture has dropped 50%. The broader technology sector is grappling with how enterprises are reallocating capital from traditional software and consulting toward data-center hardware and AI capabilities. IBM will report full second-quarter results and discuss its full-year outlook on July 22.

What the data shows for IBM investors

Meyka rates IBM a C with a Sell recommendation, citing weak returns on equity and assets. The RSI sits at 30.34, indicating oversold conditions, while the ADX at 26.47 signals a strong downtrend. Two analysts rate the stock a Buy versus two rating it a Sell, with consensus at Hold. The 12-month price forecast stands at $309.80, implying 43% upside from current levels, but that assumes a recovery from the current sell-off. The stock trades at a 19.2x trailing P/E ratio, below its 50-day average of $262.90.

What happens next

IBM will hold its earnings call on July 22 to discuss final Q2 results and provide guidance. The market will scrutinize whether the company can stabilize infrastructure revenue and clarify its strategy for competing in the AI era. A securities fraud investigation has been launched into IBM over potential inaccurate statements about financial results. Investors should monitor whether large deals resume closing in the third quarter and whether the company’s software and consulting divisions can offset infrastructure weakness.

Final Thoughts

IBM’s 25% crash reflects a real shift in enterprise spending priorities toward AI infrastructure, not a company-specific failure. With Meyka grading the stock a C and two analysts holding Buy ratings against two Sell ratings, the risk-reward hinges on whether IBM can adapt quickly enough to recapture market share in the AI era.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.