IBM shares tumbled more than 17% in premarket trading after the technology giant disclosed preliminary second-quarter results that fell short of Wall Street expectations.
The company reported adjusted earnings per share of $2.93, a figure that disappointed investors who had been counting on stronger momentum from its hybrid cloud and AI divisions.
The sharp sell-off reflects growing concern that IBM’s traditional enterprise contracts are losing ground as corporate clients aggressively redirect capital expenditures toward generative AI infrastructure and services.
The market reaction underscores a broader structural shift in the technology sector.
While IBM has positioned itself as a key player in enterprise AI through its watsonx platform and partnerships with chipmakers, the preliminary data suggests that the transition is cannibalizing legacy revenue streams faster than anticipated.
Investors are now questioning whether the company’s high-margin consulting and software businesses can offset the decline in hardware and traditional IT services.