IBM stock price plummeted 25%, or the largest decline in the company's history
On July 14, local time, IBM's stock price plunged after the U.S. stock market opened, with an intraday drop of more than 25%, which may be the largest decline in the company's history. The previous day when IBM's stock price fell the most was October 19, 1987, when the stock price fell by 23.7%. On the news, IBM CEO Arvind Krishna issued a letter to investors that day, stating that the preliminary second quarter results were lower than expected. According to expectations, IBM's second-quarter revenue is expected to be $17.2 billion, an increase of 1%.
On July 14, local time, IBM's stock price plunged after the U.S. stock market opened, with an intraday drop of more than 25%, which may be the largest decline in the company's history. The previous day when IBM's stock price fell the most was October 19, 1987, when the stock price fell by 23.7%. On the news, IBM CEO Arvind Krishna issued a letter to investors on the same day, stating that the preliminary second quarter results were lower than expected. According to expectations, IBM's second-quarter revenue is expected to be $17.2 billion, an increase of 1%. Among them, software business revenue is expected to increase by 5%, consulting business revenue is expected to be flat, and infrastructure business revenue is expected to decrease by 7%. In comparison, IBM's revenue reached $15.9 billion in the last quarter, a year-on-year increase of 9%. Among them, software revenue increased by 11% to US$7.1 billion, consulting business increased by 4% to US$5.3 billion, and infrastructure business increased by 15% to US$3.3 billion. Arvind Krishna attributed the poor performance to weakness in the software and infrastructure business as customers shifted spending to hardware purchases such as memory chips. He said in a letter to investors, "In the last few weeks of June, we saw customers shift quarterly capital expenditures to server, storage and memory purchases to ensure access to supply-strapped infrastructure before expected price increases." He also said that although the company expected some impact on the supply chain, it did not expect the magnitude of the capital expenditure readjustment to be so large. Additionally, customers were distracted by rapidly changing, industry-wide cybersecurity issues in the second quarter. Affected by various factors, the company failed to adjust and act in time, and many large transactions failed to be completed as expected, which caused most of the decline in performance. Arvind Krishna emphasized that although the company's second-quarter results were disappointing, IBM's performance in many areas showed strong momentum, which strengthened its confidence in its own portfolio and strategy. For example, the Distributed Infrastructure business had its best-ever performance, growing 37%, as customers prioritized infrastructure investments, with strong growth in the Power and Storage business and a backlog of approximately $500 million at the end of the second quarter. In addition, IBM is pursuing new initiatives and accelerating other projects, such as quantum computing, in order to improve performance in the future. Last month, IBM announced that it will invest an additional US$10 billion in quantum computing over the next five years, and plans to deliver the world's first large-scale fault-tolerant quantum computer, IBM Quantum Starling, in 2029. Customer cases include simulating molecules such as large proteins related to medical research and optimizing complex networks such as energy networks. In addition to poor performance, some believe that the company's stock price plunge is also related to continued concerns that the growth of artificial intelligence tools will affect the business of large software companies. Arvind Krishna mentioned in the letter that after the release of Anthropic's Claude Mythos model, the IBM and Red Hat teams moved quickly to launch Lightwell. (