IBM shares extend losing streak, plunge 26% in five sessions after sales miss

Shares of International Business Machines Corp (IBM) have witnessed one of their sharpest and most prolonged sell-offs in recent times, tumbling to a multi-quarter low as investors rushed to exit the stock after the company issued a cautious sales outlook.

The retreat in the AI-led rally on Wall Street further weighed on sentiment, bringing the stock's recent winning streak to an end. Over the past five trading sessions, IBM shares have plunged 26.5%, closing at $211 on Monday.

The bulk of the losses came on 14 July, when the stock slumped 25%, its biggest single-day decline since at least 3 January 1968, after the company reported preliminary second-quarter revenue that missed analysts' expectations.

IBM attributed the shortfall to customers shifting their spending toward chips and servers amid AI-driven supply shortages.

Selling pressure persisted in the following sessions, dragging the stock to its lowest level since November 2024 before it staged a modest recovery. The decline marked a sharp reversal from the stock's remarkable rally, which began in May 2023 and continued uninterrupted until June 2026, during which IBM shares had surged 163%.

Weak preliminary Q2 sales, infra slowdown weigh on sentiment

Last week, IBM reported preliminary second-quarter revenue that fell short of analysts' estimates, with Chief Executive Officer Arvind Krishna saying customers were holding back spending. The company reported preliminary second-quarter revenue of $17.2 billion on July 14, below analysts' expectations of $17.9 billion.

Sales in IBM's Infrastructure division, which includes its mainframe computers, were particularly weak, declining 7% during the quarter. The company said it is still reviewing its books and that the final results, due next week, could differ slightly from the preliminary figures.

During the first quarter ended 31 March, IBM's Infrastructure business had reported a 15% year-on-year increase in revenue to $3.33 billion, comfortably beating analysts' estimates.

In a letter to investors, Krishna said the weaker-than-expected performance in IBM's software and infrastructure businesses was driven by customers shifting their spending toward servers, storage and memory ahead of anticipated price increases.

The unprecedented global buildout of data centres to support artificial intelligence has led to severe semiconductor shortages, particularly in memory chips. The supply crunch has increased costs for manufacturers across industries, from consumer electronics to enterprise hardware.

IBM's preliminary results suggest that customers are prioritising spending on servers, chips and other AI infrastructure, leaving less room in IT budgets for software and mainframe systems.

Software investors have long been concerned that AI tools capable of automating routine tasks could pose a long-term challenge to the industry. IBM's preliminary results also indicate that the ongoing surge in AI infrastructure spending—including servers, chips and networking equipment—may be coming at the expense of software budgets.

Long-term gains remain intact despite sharp correction

Although IBM shares have retreated sharply from their recent highs, falling 36% from the all-time high of $332, the stock's long-term performance remains impressive.

Since bottoming out in 2020, IBM shares have rallied 144%, with the stock posting gains in each of the following five calendar years. Among them, 2025 was the strongest, delivering an annual return of 36%.

(With inputs from Bloomberg)

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