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Shares in IBM plunged more than 25% on Tuesday after the US tech giant released disappointing preliminary second-quarter results. IBM\u2019s stock was on track for an even steeper single-day decline than it suffered during \u2060the 1987 \u201cBlack Monday\u201d crash.<\/p>\n
IBM had issued a profit warning and blamed shifts in corporate customers\u2019 spending. The company said revenue for the three months ending in June came in at $17.2bn, up just 1% year-over-year.<\/p>\n
The company said it had \u201cfaltered\u201d in keeping pace with a move in corporate spending from software \u2060towards datacentre infrastructure and cybersecurity, and forecast second-quarter revenue below estimates, in a sign of the impact of AI on the \u2060sector.<\/p>\n
The warning triggered a \u200bslump of more than 25% in IBM\u2019s shares and a selloff in the broader software sector on Tuesday. Microsoft, ServiceNow, Salesforce and Intuit fell between 3% and 5%.<\/p>\n
A global rush by tech companies to build out artificial intelligence infrastructure has sent demand for servers, memory chips and storage soaring \u2013 driving up prices and creating supply shortages across the industry.<\/p>\n
IBM said that toward the end of June, many of its big corporate customers rushed to buy that hardware to get ahead of expected price increases.<\/p>\n
That rush pulled spending away from IBM\u2019s higher-margin mainframe computers and related software, which process millions of daily transactions for industries such as banking and airlines \u2013 the products the company had been counting on. It also noted that businesses were prioritizing cybersecurity spending given recent breakthroughs in AI hacking abilities.<\/p>\n
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Sign up to TechScape<\/span><\/p>\n A weekly dive in to how technology is shaping our lives<\/p>\n after newsletter promotion<\/p>\n Arvind Krishna, the IBM chief executive, said in a letter to investors, \u201cIn the last \u200cfew weeks of June, we saw clients shift their quarterly capex [capital expenditure] spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.\u201d<\/p>\n He added that \u201cnumerous large deals\u201d had failed to \u200bclose as expected.<\/p>\n The company\u2019s expected revenue of $17.2bn for the second quarter paled in comparison with $17.86bn forecast by analysts.<\/p>\n Adjusted earnings per share are expected to be $2.93, compared with analysts\u2019 estimate of $3.02.<\/p>\n Chris Beauchamp, the chief market analyst at IG Group, said: \u201cThis is \u2060an ugly moment for IBM and software stocks … the big question will \u200bbe how long \u200bthe shift to infrastructure and cybersecurity \u200blasts.\u201d<\/p>\n Software investors have long been on edge over fears that AI tools capable \u2060of automating routine work could pose an existential threat to the industry.<\/p>\n \u201cA \u200bfew more months \u200cmight be bearable, \u200bbut more \u200bthan that and serious questions will be asked all over again about software stocks,\u201d Beauchamp said.<\/p>\n","protected":false},"excerpt":{"rendered":" Shares in IBM plunged more than 25% on Tuesday after the US tech giant released disappointing preliminary second-quarter results. IBM\u2019s stock was on track for an even steeper single-day decline than it suffered during \u2060the 1987 \u201cBlack Monday\u201d crash. IBM had issued a profit warning and blamed shifts in corporate customers\u2019 spending. The company said<\/p>\n","protected":false},"author":1,"featured_media":51136,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[18199,4850,15921,2661,14036,3016,3116,2228,812],"class_list":{"0":"post-51135","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-falter","9":"tag-giants","10":"tag-ibm","11":"tag-loses","12":"tag-plunge","13":"tag-profits","14":"tag-quarter","15":"tag-shares","16":"tag-tech"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/51135","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=51135"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/51135\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/51136"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=51135"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=51135"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=51135"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}