IBM stock suffered sharp losses during trading on July 14, 2026, after dropping by 25%, recording the worst day of trading for the technology giant since the "Black Monday" crash in 1987, following the company's release of a profit warning, citing a sudden shift in customer spending towards AI servers and infrastructure.

The company recorded preliminary revenues of $17.2 billion during the second quarter, an annual increase of just 1%, but it fell short of analysts' expectations of $17.8 billion. Infrastructure revenue declined by 7%, while software revenue rose by 5%.

CEO: We didn't move fast enough

IBM's CEO, Arvind Krishna, acknowledged that the company failed to keep pace with the rapid transformation of the market, explaining in a letter to investors that the company did not adapt quickly enough to changes. Krishna said that many major deals were not completed on schedule, which caused the largest part of the gap between actual results and expectations.

AI breakthrough changes corporate priorities

IBM attributed its poor performance to companies redirecting their capital spending away from the company's software and mainframe systems, in favor of purchasing servers, storage units, and memory chips designed for AI applications. Krishna also explained that many customers have been preoccupied with rapid developments in cybersecurity, which has affected their buying and investment decisions. The sharp decline wiped out nearly $68 billion in market value during a single session, closing the stock at $217.05, recording the biggest daily loss since the start of tracking share data in the 1970s. This drop even exceeded IBM's losses during the "Black Monday" crash on October 19, 1987, when the stock fell by 23.7%.

Challenges of transforming into a software company

This performance reflects the difficulties IBM faces in its journey to transform from a company historically reliant on mainframes and hardware to one focused on software and cloud services. Despite spending tens of billions of dollars on major acquisitions, including Red Hat, HashiCorp, and Confluent, to boost its software business, the current wave of investment in AI is driving companies to direct their budgets towards computer infrastructure and data centers rather than software.

The race to invest in artificial intelligence is reshaping the market

IBM’s warning suggests that traditional software companies may face increasing pressure as massive spending on AI infrastructure continues, at a time when companies' ability to recover from these shifts varies.

Although markets are now more resilient to volatility than they were in 1987, thanks to mechanisms such as temporary trading halts (circuit breakers), the current wave of investment in artificial intelligence is posing new challenges for companies that have failed to keep up with changing customer priorities.