IBM shares fall 25% after profit warning as tech spending slows
The US technology giant reported just 1% revenue growth for the second quarter, blaming customers who are pulling back on spending. It was the company's worst single-day stock drop in decades.
Key points
- IBM shares fell more than 25% on Tuesday after the company issued a profit warning.
- IBM reported second-quarter revenue of $17.2 billion, up just 1% compared with the same period a year earlier.
- The company blamed the drop in profit expectations on shifts in what corporate customers are choosing to spend money on.
- The sell-off spread to other software companies, including Microsoft.
- The single-day decline was steeper than anything IBM suffered during the 1987 "Black Monday" stock market crash.
IBM, one of the oldest names in computing, lost roughly a quarter of its stock market value in a single day on Tuesday. The trigger: a profit warning, a company announcement that its earnings will come in below what investors had expected.
The numbers were blunt. IBM said revenue for the three months ending in June reached $17.2 billion. That sounds large, but it marks just 1% growth compared with the same quarter a year ago, a near standstill for a company investors expect to grow.
Management pointed to a change in behaviour among large business customers. Companies that were previously spending heavily on technology are pausing or redirecting budgets. IBM did not say exactly where the money was going instead, but the pattern is familiar across the industry: many big firms are weighing up whether to commit to expensive long-term software contracts while uncertainty about the economy persists.
The market reaction was swift and severe. A 25% drop in a single session is rare for any major company. It put Tuesday's fall on a steeper trajectory than what IBM experienced on Black Monday in October 1987, when global stock markets collapsed in one of the worst crashes in financial history.
The pain spread beyond IBM. Shares in Microsoft also fell as investors sold off software stocks broadly, a sign that the market read IBM's warning as a signal about the health of corporate technology spending in general, not just one company's performance.
The Guardian AI first reported the preliminary results as markets were still digesting the news.
What does this mean for ordinary people?
For most people, a bad day for IBM shares does not change anything directly. But the wider picture matters. When big businesses slow their technology spending, it can delay new tools reaching workplaces, and it sometimes signals broader caution about the economy.
If you work in enterprise software sales, IT procurement, or any role tied to large technology contracts, the mood IBM's results describe, hesitant corporate buyers, is worth watching. Budgets that were open six months ago may now face more scrutiny.
For anyone with pension savings or index-linked investments, a sector-wide sell-off in software stocks can nudge portfolio values. It is worth checking in with a financial adviser if you are concerned, rather than reacting to a single day's headlines.
