IBM shares collapsed 25% in US trading on Tuesday following the release of disappointing preliminary second-quarter results.
The sell-off marks the technology giant's most severe single-day decline since the 1987 market crash, wiping out billions in market value in a matter of hours.
The sharp repricing reflects investor frustration with the company's ability to navigate the current technological shift.
CEO Arvind Krishna acknowledged the strategic misstep, admitting that the company "did not adapt quickly enough" to the rapid changes in the industry.
The preliminary results highlighted how the ongoing boom in artificial intelligence spending is disrupting traditional business models, leaving IBM's legacy infrastructure and services segments under pressure.
Investors are now questioning whether the company's pivot to hybrid cloud and AI can offset the erosion in its core revenue streams.