IBM (IBM) stock collapsed more than 25% on Tuesday, its worst drop in decades, after the company preannounced earnings that fell well below Wall Street's expectations, as customers shifted spending away from software and mainframe products and toward AI servers and memory.
Analysts had anticipated IBM to report adjusted earnings per share (EPS) of $3.02 on revenue of $17.86 billion, but the company came up well short, posting adjusted EPS of $2.93 and revenue of $17.2 billion.
In a statement, IBM CEO Arvind Krishna said the company was prepared for a low-single-digit decline in its z17 mainframe business for the quarter, but the results were far worse than projected and are at least partially related to the global memory shortage.
The shortage is impacting enterprise businesses as well as consumer goods including Apple's (AAPL) Mac and iPad, Microsoft's Surface line of laptops and hybrid tablets, and video game consoles from Sony (SONY), Microsoft (MSFT) , and Nintendo (NTDOY).
"In the last few weeks of June, we saw clients shift their quarterly [capital expenditures] spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases," Krishna said.
"This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization," he added.
IBM stock was previously off just 4.8% since the start of the year heading into Tuesday, but is now off 26%.
The company's chief competitors aren't faring much better, though. Shares of Oracle (ORCL) are off 33% year-to-date, while Microsoft has declined 20%. Accenture (ACN), meanwhile, is down 50%.
IBM will hold its quarterly earnings call on July 22.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X at @DanielHowley.
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