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.
- Second-quarter revenue reached $17.2 billion, up just 1% on the same period a year earlier.
- IBM blamed the shortfall on shifts in what corporate customers are choosing to spend money on.
- The sell-off spread to other software companies, including Microsoft.
- Tuesday's single-day decline was steeper than anything IBM suffered during the 1987 "Black Monday" crash.
IBM, one of the oldest names in computing, lost roughly a quarter of its stock market value in a single day on Tuesday, after issuing a profit warning: an announcement that earnings will come in below what investors had expected.
The numbers are blunt. Revenue for the three months ending in June came to $17.2 billion, up just 1% on the same quarter a year ago. For a company investors expect to grow, that's close to a standstill.
Management pointed to a change in behaviour among large business customers. Companies that were previously spending heavily on technology are pausing or redirecting budgets. The pattern is familiar across the industry: big firms are weighing whether to commit to expensive long-term software contracts while economic uncertainty persists. Our 13 July story on Microsoft's CEO warning that companies are paying for AI twice captured the same anxiety from a different angle: enterprises are questioning not just the cost of technology contracts but what they give up by signing them.
The market reacted fast. A 25% drop in a single session put Tuesday's fall on a steeper trajectory than Black Monday in October 1987, when global markets collapsed in one of the worst crashes in financial history. Microsoft shares also fell as investors sold software stocks broadly, a sign that IBM's warning read as a signal about corporate technology spending overall, not one company's stumble.
What does this mean for ordinary people?
For most people, a bad day for IBM's stock changes nothing directly. The wider picture is harder to ignore, though. When big businesses slow technology spending, it can delay new tools reaching workplaces and sometimes signals broader caution about the economy.
If your role touches large technology contracts, whether in sales, procurement or IT planning, the hesitant buyer mood IBM's results describe is worth watching. Budgets that were open earlier this year may face sharper scrutiny now.
For anyone with pension savings or index-linked investments, a sector-wide software sell-off can nudge portfolio values. One bad day's headlines aren't a reason to act, but it's worth a conversation with a financial adviser if you're concerned.
