TLDR
- IBM’s Q2 revenue came in at $17.2 billion, up just 1% year over year, missing the $17.85 billion Wall Street estimate
- Adjusted EPS of $2.93 missed the $3.02 estimate; Infrastructure revenue fell 7%
- The stock dropped from around $290 to roughly $215 in a single session on July 14
- HSBC downgraded IBM to Reduce with a $191 price target
- Full Q2 earnings call is scheduled for July 22, where guidance and mainframe outlook will be key
IBM (IBM) stock cratered on July 14 after the company released a preliminary Q2 earnings letter that caught Wall Street off guard. The stock fell from around $290 to roughly $215 in a single session — a drop of about 26%.
International Business Machines Corporation, IBM
Q2 revenue came in at $17.2 billion, up just 1% year over year. That missed the Wall Street estimate of $17.85 billion by a wide margin. Adjusted EPS of $2.93 also fell short of the $3.02 consensus.
The miss was broad. Infrastructure revenue dropped 7%. The Z mainframe business, which had surged 51% in Q1, reversed sharply. Software grew 5%, down from 11% in Q1. Consulting was flat.
CEO Arvind Krishna called the results “disappointing.” He said clients shifted spending toward servers, storage, and memory in late June due to supply concerns. Large deals also didn’t close on time. He added that a wave of cybersecurity incidents in June pulled enterprise attention — and budgets — elsewhere.
IBM opened at $211.25 on Thursday, July 16, just above its one-year low of $211.03. The stock’s 50-day moving average stands at $264.41.
Wall Street Reacts
HSBC downgraded IBM to Reduce with a $191 price target following the announcement. BMO Capital Markets cut its target from $290 to $270 with a market perform rating. The consensus among analysts currently sits at a Moderate Buy with an average price target of $307.17, though that reflects ratings set before the Q2 warning.
Several law firms have announced securities-fraud investigations tied to the earnings warning, adding another layer of pressure on the stock.
Not everyone turned bearish. KKM Financial’s Jeff Kilburg called the dip a buying opportunity. Hightower’s Stephanie Link said IBM remains well positioned in quantum and enterprise AI. Royal Bank of Canada and Piper Sandler both reiterated constructive ratings in June.
The stocks that benefited most on July 14 were Dell and HP Enterprise — the companies that sell the servers and storage IBM’s clients apparently chose to buy instead. IBM’s Q2 miss was their gain.
Jim Cramer had told viewers on July 9 to buy IBM, calling it inexpensive and praising CEO Krishna’s management. That call aged poorly. On the morning of the crash, Cramer appeared on Squawk on the Street and noted that AI spending appeared to be rotating toward infrastructure and cybersecurity — without repeating the buy call.
What to Watch on July 22
IBM’s full Q2 earnings call is set for July 22. Three things matter most heading into it: whether software growth can return toward 10%, whether consulting shows improvement, and how management frames the mainframe decline.
BofA said before the report that it expects IBM to lower its full-year guidance, particularly on the software side. If that happens, the stock likely has further to fall. If Krishna can frame the Q2 miss as a timing issue rather than a structural problem, the picture looks different.
IBM still carries a 2.28% dividend yield, backed by 31 consecutive years of increases. The quarterly dividend was raised to $1.69 in the most recent payment. Free cash flow year to date stands at $4.8 billion.
Bank of New York Mellon trimmed its IBM position by 0.3% in Q1, selling 22,236 units. Institutional investors collectively own 58.96% of the stock.
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