IBM suffered its worst single-day stock rout in history on Friday, with shares plummeting 24% after the company reported earnings that badly missed Wall Street estimates. The collapse erased approximately $40 billion in market capitalization and sent shockwaves through the technology sector.
Earnings miss and AI costs
IBM reported quarterly revenue of $14.2 billion, well below the $15.8 billion analysts had expected, while earnings per share of $1.67 missed consensus estimates by more than 20%. The company blamed weakening demand for its traditional IT consulting and managed infrastructure services, as clients delay non-urgent projects. At the same time, IBM's investments in AI infrastructure and its Watsonx platform are costing more than anticipated, with the company warning that margins would remain under pressure for at least two more quarters.
Broader market anxiety
The IBM crash compounds a difficult week for markets already rattled by oil prices surging past $95 as the Iran conflict disrupts shipping through the Strait of Hormuz and the Red Sea. The White House's announcement of new tariffs on 60 trading partners has added another layer of uncertainty. The Dow Jones Industrial Average fell more than 600 points in afternoon trading, with IBM — a Dow component — accounting for roughly half the decline.
Analysts slash price targets
At least seven Wall Street analysts downgraded IBM stock or slashed their price targets following the report. Goldman Sachs cut its target from $220 to $155, citing "structural headwinds" in IBM's legacy business lines and questioning the timeline for AI-related revenue to materialize at scale.