IBM Shares Fall 24.8 Percent After CEO Letter Cites Deal Delays and AI Spending Shift

IBM shares fell 24.8 percent Tuesday morning to around 218 dollars per share, Forbes reported. The move marked the largest single-day decline for the stock since October 19, 1987. The drop erased approximately 67 billion dollars from IBM's market capitalization and left the firm valued at just under 205 billion dollars.

CEO Arvind Krishna sent a letter to investors Tuesday that addressed the company's disappointing second-quarter results. Krishna stated that what played out was worse than expectations and that IBM did not adapt and move quickly enough. He said customers shifted spending from software toward AI hardware purchases because of supply constraints and anticipated price increases for servers, storage and memory.

Krishna noted that IBM had anticipated some supply-chain disruptions but did not expect the full magnitude of the capital-expenditure reprioritization by clients. He also cited the release of Anthropic's Mythos as a factor that stalled several large deals and said clients were distracted by rapidly evolving industry-wide cybersecurity concerns.

Numerous large deals failed to close on expected timelines, which drove the majority of the shortfall, Krishna stated.

IBM will report second-quarter earnings on July 22. Wall Street analysts anticipate 17.2 billion dollars in quarterly revenue and 2.93 dollars in earnings per share, according to FactSet. Those figures would represent year-over-year increases of 1.3 percent and 3.5 percent, respectively.