IBM's historic stock crash: What triggered the 25% plunge?

IBM shares plunged about 25% on July 14 after the company unexpectedly warned that its second-quarter results would miss Wall Street estimates. The selloff wiped out roughly $70 billion in market value and marked the stock's steepest one-day decline on record, surpassing losses during the 1987 market crash. (Sources: CNBC, Forbes, Financial Times)

IBM expects second-quarter revenue of about $17.2 billion, below analysts' expectations of nearly $17.9 billion. Adjusted earnings are projected at $2.93 per share, also missing estimates, after weaker-than-expected performance in its software and infrastructure businesses.

Chief Executive Arvind Krishna said many enterprise customers redirected their technology budgets toward AI infrastructure such as servers, storage and memory chips, delaying or cancelling software purchases. IBM admitted it underestimated the scale of this spending shift.

IBM's flagship z17 mainframe rollout failed to generate the expected momentum. Infrastructure revenue declined as clients postponed purchases, while several large enterprise deals slipped beyond the quarter, weighing on overall performance.

IBM's warning rattled the broader technology sector, reinforcing fears that AI infrastructure spending is squeezing enterprise software budgets. Shares of companies including Microsoft, Salesforce, ServiceNow and Intuit also declined as investors reassessed growth prospects across software firms.

Along with changing customer priorities, IBM acknowledged execution problems. The company said several large deals failed to close on schedule and management did not respond quickly enough to rapidly changing market conditions during the quarter.

The warning raised concerns that the AI boom may be benefiting chipmakers and hardware suppliers more than enterprise software companies in the near term. Investors also questioned whether software vendors could face prolonged pressure if corporate IT budgets remain focused on AI infrastructure.

Despite the disappointing quarter, IBM reiterated its long-term strategy. The company highlighted continued growth at Red Hat, expanding AI partnerships, and plans to invest more than $10 billion in quantum computing over the next five years, while maintaining confidence in its broader transformation strategy.