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NewsMacro

IBM craters 23% on second-quarter earnings warning as clients shift spend to hardware

A second-quarter earnings warning from International Business Machines (NYSE: IBM) has sent shares 23% lower in the session. The company's chief executive officer placed the blame on weakness in software and infrastructure, pointing to a concrete cause: clients redirected their spending toward hardware purchases. The formal second-quarter earnings release is the next item in focus.

By Grant HalloranMacro DeskJuly 20, 20262 min read
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Key takeaways

  • IBM shares fell 23% in a single session after the company issued a second-quarter earnings warning.
  • IBM's CEO attributed the miss to weakness in software and infrastructure as clients redirected spending toward hardware purchases.
  • The warning was issued before IBM formally reported actual second-quarter results, so the market is repricing on management's word rather than audited figures.
  • A 23% single-session decline signals the shortfall was not priced in by the market.
  • IBM's second-quarter earnings release is the next event that will convert the pre-announcement into specific figures.

A second-quarter earnings warning from International Business Machines (NYSE: IBM) has sent shares 23% lower in the session. The company's chief executive officer placed the blame on weakness in software and infrastructure, pointing to a concrete cause: clients redirected their spending toward hardware purchases. The formal second-quarter earnings release is the next item in focus.

The CEO's read on the miss

The CEO's explanation is a spending rotation story. Budgets that once went to software and infrastructure moved into hardware. That shift was severe enough to force a public warning before the quarterly results formally arrive, and both the software and infrastructure segments are named as the areas that bore the impact.

The warning lands before IBM has reported actual second-quarter results. The market is repricing on management's word, with audited figures not yet in hand. The 23% session decline is the tape's response to that pre-announcement.

What it means for the setup

A single-session move of 23% signals the shortfall was not priced in. The CEO has offered a directional explanation, but the hard numbers remain outstanding: how much revenue fell short, whether guidance is revised, and how management frames the durability of the hardware-over-software spending shift among its clients.

The software and infrastructure businesses are in focus. Whether the client rotation the CEO described is a one-quarter event or something that persists is the central question the setup now hinges on.

What to watch

The event that resolves this is IBM's second-quarter earnings release. That report converts the CEO's pre-announcement into line-item specifics: revenue versus prior expectations, the shape of any new guidance, and whether management treats the hardware spending rotation as temporary or structural. Until those numbers land, the 23% session print is the market's best read on the damage.

About this story

Filed by the macro desk of MarketPR on July 20, 2026. Source: cnbc.com. Indicative figures are not investment advice.

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Frequently asked

Why did IBM stock drop 23%?

IBM issued a second-quarter earnings warning, with its CEO blaming weakness in software and infrastructure as clients shifted spending toward hardware.

Has IBM reported its actual second-quarter results yet?

No, the warning came before IBM's formal second-quarter earnings release, so the market is reacting to management's pre-announcement rather than audited numbers.

What reason did IBM's CEO give for the earnings miss?

The CEO described a spending rotation in which client budgets that once went to software and infrastructure moved into hardware purchases.

What should investors watch next?

IBM's second-quarter earnings release, which will reveal how much revenue fell short, any new guidance, and whether management views the hardware spending shift as temporary or structural.