Shares of IBM came under heavy selling pressure in pre-market trading on Tuesday, July 14, plunging 22% to $228 apiece after the company reported preliminary second-quarter sales below analysts’ estimates, with Chief Executive Officer Arvind Krishna saying customers were holding back spending.
Preliminary second-quarter revenue came in at $17.2 billion, IBM said in a statement on Tuesday, below analysts’ estimates of $17.9 billion.
Sales from the company’s infrastructure division were hit particularly hard, falling 7%. IBM added that it is still reviewing its books and that the final results may differ slightly from the preliminary figures.
In a letter to investors, Krishna said the weaker-than-expected performance in the software and infrastructure businesses was driven by customers shifting their spending towards servers, storage and memory ahead of anticipated price increases.
If the losses persist, the stock is on track to post its biggest intraday decline since the 1980s. The weak update also weighed on other enterprise software companies, with Workday shares falling more than 8% and ServiceNow declining about 7.7%.
IBM has tried to refashion itself into a high-growth software company through major acquisitions of Red Hat, HashiCorp and Confluent. The company’s new focus has made it a target for investors concerned that artificial intelligence tools will replace many current software products, Bloomberg reported.
In February, IBM saw a steep selloff after AI startup Anthropic PBC unveiled a tool it said could help modernize a dated programming language that runs on IBM mainframes.
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