IBM Shares Decline as Starbucks Plans to Replace Vendor With Proprietary AI

Shares of International Business Machines (NYSE: IBM) fell 3.5% in pre-market trading after Starbucks revealed it is developing proprietary AI-powered software tools to replace a maintenance management system currently provided by IBM.

Client AI Development Fuels Concerns

Starbucks announced the move as part of a broader corporate initiative to cut $2 billion in costs, according to a disclosure from the company. The coffee chain, which reportedly spends approximately $400 million annually on software, is reviewing all of its technology contracts.

This development has amplified investor concerns about IBM's competitive positioning. The move by a major client suggests a growing trend of large enterprises leveraging their own AI capabilities to build in-house solutions, potentially cannibalizing the market for established vendors like IBM rather than expanding it.

Market Backdrop and Upcoming Earnings

Ad

The timing of the news adds to investor caution, as IBM is scheduled to report its second-quarter 2026 earnings on July 22. Analysts are forecasting earnings per share of approximately $3.02 on revenue of nearly $17.89 billion, and the Starbucks announcement creates a new point of uncertainty ahead of the release.

The stock's decline also occurred within a cautious market environment. Broader indexes fell in the previous session amid escalating US-Iran tensions and Federal Reserve minutes that suggested some policymakers were open to further rate hikes, creating headwinds for technology stocks.

Analyst Notes and Recent Developments

Despite the immediate pressure, some analysts maintain a constructive view. Bank of America recently raised its price target on IBM to $330 and maintained a Buy rating. Earlier this week, IBM and its subsidiary Red Hat also launched Lightwell, an open-source platform for vulnerability remediation.