IBM CEO Arvind Krishna issued a heavy warning, and the company's stock price plummeted, which is expected to record the worst single-day performance in the history of this 115-year-old company. IBM's stock price fell 24% after the market opened. The largest single-day decline in the company's history occurred on "Black Monday" on October 19, 1987. The stock fell 23.7% that day, which simultaneously staged the most tragic crash in the history of the U.S. stock market.
IBM campus in Foster City, California, Wednesday, June 14, 2023
IBM will officially release its quarterly financial report on July 22. Krishna disclosed a performance warning in advance, saying that the company's operations have been under pressure in the past three months: corporate customers have significantly adjusted their technology budgets and rushed to buy servers, storage equipment and memory chips that are needed for AI data centers.
Customers slashed their budgets for IBM's new z17 mainframe as funds were diverted. This host was originally the core product that IBM bet on to grab enterprise customers in the AI era.
"The actual operating situation was worse than we expected, and we did not adjust quickly enough," Krishna said in a statement on second-quarter results.
In recent months, demand for core components in data centers has exploded, and the prices of chips (especially memory and storage processors) have skyrocketed. Apple has already raised the prices of Macs and iPads, and other technology companies are expected to follow suit with price increases.
IBM had predicted changes in the industry before, but the change in customers' behavior of rushing to buy chip equipment and making centralized purchases while prices were still controllable far exceeded the company's expectations.
Krishna said: "Our performance expectations have included the impact of some supply chains, but we did not expect such a drastic adjustment in corporate capital expenditure priorities."
IBM added that Anthropic's launch of the Mythos large model also distracted customers from purchasing. The AI company has warned that Mythos will provide hackers with tools to exploit network security vulnerabilities in enterprise systems. As a result, many major customers have suspended large-scale cooperation orders originally planned for this quarter.
"The current market environment requires the team to be extremely efficient, but we made execution errors this quarter. These are not excuses, but objective realities." Krishna said.
He said that IBM is rapidly launching innovative solutions to deal with this round of industry turmoil. In order to hedge against the security risks brought by Mythos, the company quickly launched the open source security software Lightwell.
The company's preliminary operating data showed that revenue in the last quarter increased only 1% year-on-year, and unadjusted earnings per share fell 2%. Both indicators were lower than internal expectations.
Like many technology companies, IBM's stock price has continued to fluctuate and weaken this year. The stock has fallen by 2% since 2026, making it difficult for investors in the technology sector to judge how each company should adapt to the rapidly iterative industry landscape.