IBM Loses Nearly $70 Billion In A Day, Here's What Triggered The 25% Share Crash

IBM suffered its biggest stock market crash in 58 years after its shares plunged 25 percent in a single trading session. The sharp fall wiped out nearly USD 70 billion in market value, making it one of the company's worst-ever trading days.

The sell-off came after IBM released a disappointing preliminary update for the June quarter, raising concerns about its near-term growth.

Weak quarter

IBM said its revenue for the quarter ending June increased just 1 percent year-on-year to USD 17.2 billion, missing market expectations.

CEO Arvind Krishna admitted the company was slow to respond to changing market conditions.

"We faltered and did not adapt and move quickly enough," Krishna said in a letter to investors.

Mainframe business slows

One of the biggest reasons behind the weak performance was IBM's infrastructure business.

Revenue from its mainframe division, which serves banks and large enterprises, declined 7 percent during the quarter.

Software revenue grew 5 percent, but that was also below what analysts had expected.

AI spending changes priorities

IBM said many large customers shifted their technology budgets towards AI infrastructure.

Companies rushed to buy servers, storage systems and memory chips before expected price increases caused by global supply shortages.

This reduced spending on IBM's higher-margin mainframe systems and related software, hurting the company's quarterly performance.

Cybersecurity spending rises

IBM also said customers spent more on cybersecurity as businesses prepare for more advanced AI-powered cyber threats.

The launch of Anthropic's Mythos AI model increased concerns about cyberattacks, leading many companies to strengthen security instead of investing in other technology projects.

Cybersecurity stocks benefited from this trend, while traditional software companies came under pressure.

Mixed outlook

The warning also raised fresh questions about the future of traditional software companies as AI changes customer spending patterns.

However, IBM still reported some positive developments. Its Red Hat business posted 11 percent revenue growth, while its server and storage business outside the mainframe segment jumped 37 percent.

IBM also announced Lightwell, a USD 5 billion initiative aimed at improving open-source software security with support from major global banks.

While the latest quarter disappointed investors, IBM believes growing demand for AI infrastructure, cybersecurity and open-source software could support its long-term strategy.

Disclaimer: This report is based on publicly available company disclosures and market data and is intended solely for informational purposes, not investment advice.