It plummeted 22% at the opening! IBM warns that performance will fall short of expectations as AI infrastructure boom seizes corporate software spending budgets

It plummeted 22% at the opening! IBM warns that performance will fall short of expectations as AI infrastructure boom seizes corporate software spending budgets.

Technology giant IBM admitted that the company failed to keep up with the pace last quarter, resulting in disappointing performance. On July 14, local time, IBM's preliminary quarterly sales results announced before the U.S.

stock market opened showed that the company suffered a heavy blow due to its failure to keep up with the shift of corporate spending from software to data center infrastructure.

IBM expects second-quarter revenue of about $17.2 billion, lower than market expectations of $18 billion; it expects adjusted earnings per share of $2.93, lower than market expectations of $3.01.

The statement also showed that sales of IBM's infrastructure business unit were particularly hard hit, unexpectedly falling by about 7%; software revenue increased by 5%, and consulting business was basically flat. The company said it is still reviewing its accounts and final results may differ slightly.

IBM is expected to officially announce its second-quarter financial results on July 22. This performance alert caused IBM's stock price to plummet 22% at opening, recording the largest single-day intraday drop since the 1980s, and led to a sell-off in the entire software sector.

The opening stock prices of Microsoft, ServiceNow, Salesforce, Workday and Intuit fell by 3% to 7% respectively. Meanwhile, Dow Jones futures were lower, while the iShares Technology Software Sector ETF fell more than 4% at one point.

IBM CEO Arvind Krishna said: "In the last few weeks of June, we saw customers shift their quarterly capital expenditures sharply towards the purchase of servers, data storage equipment and memory to lock in supply-constrained infrastructure ahead of expected price increases." IBM had previously expected that the company's latest generation flagship

mainframe z17 would become an important growth driver for the infrastructure business, but its actual performance was lower than expected. Krishna said that weak sales of the Z series platform and related software ecosystem, especially transaction processing software, are one of the important reasons for the performance gap this quarter.

Krishna added: "While we accounted for certain supply chain-related impacts in our expectations, we did not anticipate the magnitude of this capital expenditure readjustment." He admitted that the company was "faltered" in quickly adapting to the market, and "many large transactions" failed to complete as scheduled, becoming a major factor in the performance being less than expected.

Krishna also noted that industry-wide cybersecurity concerns this quarter distracted customers from focusing on purchasing decisions: "These are not excuses, they are realities.

Our job is to help customers navigate uncertainty and find ways to grow their business, no matter how the external environment changes." The analysis points out that this is the clearest sign yet that AI is causing an increasingly heavy blow to the software industry.

Investors in the software space have long been anxious that AI tools that automate routine tasks could pose a huge threat to the industry. IBM's performance shows that growing spending on AI servers, chips and network equipment is also eating into software budgets.

In this regard, Chris Beauchamp, chief market analyst at the British IG Group, said that this is a difficult moment for IBM and software stocks: "The biggest question will be how long this shift in spending towards infrastructure and network security will continue.

It may be bearable for a few more months, but if it lasts longer, the entire market will once again raise serious questions about the prospects of software stocks." (

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