IBM Shares Plunge After Q2 Revenue Forecast Misses Estimates on AI Spending Shift

International Business Machines Corp. (NYSE: IBM) issued a preliminary second-quarter revenue forecast that fell short of Wall Street estimates, citing a rapid shift in corporate spending toward artificial intelligence infrastructure. The announcement, made Tuesday, triggered a sharp 17% sell-off in the company's shares in premarket trading.

Preliminary Results Miss Expectations

IBM disclosed its preliminary results ahead of its official earnings report, providing figures that disappointed investors. The company said it expects:

• Second-quarter revenue of $17.2 billion, below the analyst consensus of $17.86 billion, according to data compiled by LSEG.
• Adjusted earnings per share of $2.93, compared with the average Wall Street estimate of $3.02.

Shift in Client Priorities

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The revenue shortfall reflects a broader industry trend where customers are reallocating technology budgets away from traditional software to focus on foundational AI hardware. IBM said its clients are prioritizing investments in servers, storage, and memory to build out their AI capabilities.

In a letter to investors, CEO Arvind Krishna acknowledged the company's execution challenges. Krishna stated that IBM "faltered" in adapting quickly enough to the evolving market conditions, which led to "numerous large deals" not closing as expected during the quarter.

Market Context

IBM's guidance highlights the disruptive impact of the AI investment cycle on established enterprise technology providers. While companies supplying the core infrastructure for AI are seeing booming demand, legacy software and services firms face headwinds as corporate clients reassess spending priorities. This dynamic suggests that the transition to AI-centric operations is creating clear winners and losers across the technology sector.