‘We faltered, did not move quickly:’ How IBM CEO Arvind Krishna’s statement led to $70 billion wipeout

IBM shares rose nearly 2% in premarket trade on Wednesday, a day after the US technology major suffered its worst one-day stock fall in 58 years and lost nearly $70 billion in market value. The stock had plunged about 25% on Tuesday after the company’s preliminary second-quarter numbers came in below Wall Street expectations. The fall was the sharpest for IBM since 1968, according to Bloomberg.

What caused IBM share price crash

The crash was triggered by weak preliminary results and a warning from the management that customers had shifted spending towards artificial intelligence infrastructure instead of IBM’s traditional software and infrastructure products.

IBM said it expects second-quarter revenue of $17.2 billion, up only 1% from a year earlier. Analysts were expecting revenue of $17.86 billion, according to LSEG data. Adjusted earnings per share are expected at $2.93, below the Street estimate of $3.02.

The company’s infrastructure business, which includes its mainframe line, saw revenue fall 7%. Software revenue grew 5%, but still missed expectations. That was enough to worry investors because software and high-margin enterprise products are key to IBM’s profit story.

Also Read: IBM stock tumbles 25% as preliminary quarterly results fall below expectations

CEO Arvind Krishna admitted that the company had failed to respond quickly to changing customer priorities. “We faltered,” Krishna said in a letter to investors, adding that IBM “did not adapt and move quickly enough.” He said several large deals did not close as expected.AI impact

The pressure came from a sudden shift in client spending. A global rush to build AI data-centre capacity has sharply lifted demand for servers, memory chips and storage. That has created supply shortages and pushed customers to secure hardware before prices rise further.

Krishna said that in the last few weeks of June, clients moved their quarterly capital spending towards servers, storage and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.

IBM said it had expected some supply-chain impact, but not the scale of the spending shift. The result was weaker-than-expected software and infrastructure revenue, along with delayed large deals.

The fall also hit the broader software sector. Investors have already been worried that artificial intelligence could reduce demand for some traditional software products by automating routine work. IBM’s warning added another concern: even when companies spend on AI, the money may first go to chips, servers, storage and data centres rather than software services.

Shares of Microsoft, ServiceNow, Salesforce and Intuit also fell after IBM’s update, while software exchange-traded funds declined as investors reassessed the sector.

The selloff shows how uneven the AI boom has become. Chipmakers, memory companies and hardware suppliers have benefited from the first wave of AI spending. Software companies are facing a tougher question: how much of that spending will eventually flow into their products, and how long customers will delay other technology deals to fund AI infrastructure.

For IBM, the rebound in premarket trade suggests some investors may see Tuesday’s 25% crash as overdone. But the damage to sentiment is clear. The company will now have to convince investors that the June-quarter miss was temporary and that delayed deals can still close in future quarters.