$IBM 's warning sends panic into software, consulting stocks


Jul 14, 2026, $NOW $CRM $DDOG $MSFT $HUBS
IBM's (IBM) unexpected warning that revenue for the second quarter would miss estimates sent a panic into software and consulting stocks on Tuesday.
IBM shares crashed more than 20% in premarket trading after CEO Arvind Krishna said customers shifted their spending in the last few weeks of June towards servers, storage and memory. ServiceNow (NOW) shares fell nearly 7%, while Salesforce (CRM) lost 5%. Also losing ground were Adobe (ADBE), Workday (WDAY), Hubspot (HUBS), Datadog (DDOG), and Microsoft (MSFT), all of which fell 3% or more.
Consulting stocks also fell sharply on IBM's warning, with Accenture (ACN) and Cognizant Technology Solutions (CTSH) down 8% and 7%, respectively.
IBM said preliminary revenue during the second quarter was $17.2B, worse than the $17.85B analysts had expected. Adjusted earnings per share were $2.93, below the $3.02 analysts anticipated.
Consulting revenue was flat year-over-year and up 1% at constant currency, while infrastructure revenue fell 7%. Within Software, Red Hat revenue growth accelerated sequentially to 11%, while recent acquisitions, including both HashiCorp and Confluent, delivered strong performance, IBM added.
“Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter,” Krishna explained. “What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. 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. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.”
IBM will hold its regularly scheduled conference call on July 22 to go into deeper detail and discuss our full-year expectations.
IBM-24.91%
NOW-4.88%
CRM-0.89%
DDOG2.46%
MSFT-1.17%
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