IBM shares drop more than 17% after company warns second-quarter earnings fell short of expectations

People work on the floor of the New York Stock Exchange (NYSE) on July 07, 2026 in New York City.

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International Business Machines shares slipped double digits on Tuesday after the hardware, software and consulting provider released preliminary second-quarter results that fell short of expectations.

The tech company reported adjusted earnings of $2.93 a share on revenue of $17.2 billion, below analysts' expectations for earnings of $3.01 a share and revenue of $17.86 billion, according to FactSet.

Shares sank 23% in premarket trading.

CEO Arvind Krishna blamed the shortfall on weakness in the software and infrastructure business, as clients shifted spending toward hardware purchases such as memory chips.

"In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases," Krishna wrote in a letter to IBM investors. "While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization."

"These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall," Krishna added.

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