IBM Plunges 25.21%, Erasing About $59 Billion in Worst Day in 115-Year History

IBM plunges 25%

"Clients stockpiled memory and servers"

Mainframe and software demand jolted

IBM shares tumbled 25.21% on July 14, the company’s biggest one-day drop on record. The decline exceeded the loss on Black Monday on Oct. 19, 1987.

The stock closed at $217.05 on the New York Stock Exchange. The selloff followed an unusual preliminary earnings update from IBM ahead of its formal second-quarter results due July 22. The company said second-quarter revenue would be $17.2 billion, below the market expectation of $17.9 billion.

Revenue still rose 1% from a year earlier, but infrastructure revenue fell 7%, far short of market expectations. Software revenue rose 5% and consulting was flat. Even so, investors were disappointed that the software and infrastructure businesses, which had been expected to benefit from the launch of the new z17 mainframe, missed expectations.

Chief Executive Officer Arvind Krishna, in a letter to investors, blamed customers' tighter budgets for the weakness. In the final weeks of June, clients redirected quarterly capital spending to purchases of servers, storage and memory to secure infrastructure in tight supply before prices rose. IBM had expected some supply-chain effects, he wrote, but not the scale of the shift in capital spending.

The stockpiling of memory and servers reflects a broader shortage driven by AI data centers. Samsung Electronics Co., SK Hynix Inc. and Micron Technology Inc. have focused production on specialized memory for AI, tightening supplies of commodity memory used in servers, PCs and smartphones. Hardware prices have climbed since late last year. As companies rushed to secure hardware before prices rose further, purchases of IBM software and services were pushed back.

Krishna also acknowledged that the company’s Z mainframe business underperformed IBM’s own forecast. Z mainframes are enterprise computing systems used to process large volumes of transactions and detect fraud in real time in areas such as credit-card payments and stock trading. Mainframes are recorded as hardware revenue, while COBOL, the programming language that runs on them, contributes to software and consulting revenue.

IBM shares had already suffered one sharp selloff this year. On Feb. 23, the stock fell 13.2% after Anthropic said its AI tool Claude Code could automate the search and analysis work at the core of COBOL modernization. That marked IBM’s biggest one-day drop since October 2000, after the dot-com bubble burst.

COBOL still underpins critical systems across finance, aviation and government, including about 95% of ATM transactions in the US. But the pool of workers who can use the language is shrinking each year. Concern that AI could erode the legacy-modernization market has added to worries about one of IBM’s high-margin businesses.

The earnings warning rippled across the broader software sector. Anurag Rana, a Bloomberg Intelligence analyst, said discretionary IT spending is deteriorating and could become a central theme in upcoming software earnings reports. Shares of major software-as-a-service companies also fell on July 14, including Adobe Inc. (-4.26%), Salesforce Inc. (-2.14%), ServiceNow Inc. (-5.76%) and SAP SE (-3.23%).

Kim In-yeop, Silicon Valley correspondent, Hankyung.com inside@hankyung.com