IBM Shares Plummet 25% in 58-Year Worst Drop

IBM experienced its most significant stock price drop in 58 years, with shares plunging 25% following dismal second-quarter preliminary results. The tech giant reported a mere 1% increase in revenue, reaching $17.2 billion for the period ending in June. CEO Arvind Krishna acknowledged that the company "faltered" and was too slow to adapt.

The infrastructure business, including its critical mainframe line, saw a seven percent revenue decrease. Software revenue grew by five percent but also fell short of projections. This downturn was exacerbated by a global rush for AI infrastructure, leading to soaring demand and prices for servers and memory, causing supply shortages across the industry.

Corporations accelerated hardware purchases in late June to preempt expected price increases. This surge in spending shifted customer capital expenditure away from IBM's high-margin mainframes and associated software. Cybersecurity concerns also played a role, with businesses prioritizing defenses against sophisticated AI-powered threats rather than other planned projects.

Despite the setbacks, IBM's Red Hat open-source software unit achieved 11% revenue growth, and its non-mainframe server and storage business surged 37%. The company also launched a $5 billion initiative, Lightwell, to address vulnerabilities in open-source software, backed by major financial institutions.