IBM shares fell 25% on Tuesday, the worst single-session decline in a company that’s been trading on the New York Stock Exchange since 1916. The previous record, 23.7% on Oct. 19, 1987, was set on a day the entire market cratered. This one belonged to IBM alone.

The proximate cause was a preliminary Q2 letter from CEO Arvind Krishna, released Monday, guiding to $17.2 billion in revenue (up 1%) and $2.93 in adjusted EPS, against consensus of roughly $17.85 billion and $3.01. Software up 5%, consulting flat, infrastructure down 7%. Not a catastrophe on paper. The tape disagreed.

What did the damage was Krishna’s explanation. “In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.” Translated: the AI buildout is now vacuuming budget out of every other line item in enterprise IT, including the software and services IBM had been reassuring investors were insulated. “While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization.” And then, unusually candid for a CEO letter: “these conditions require our teams to execute perfectly, and this quarter we faltered.”

Bloomberg clocked the intraday low at $215.67, down as much as 26%, the largest intraday drop in its records going back to at least January 3, 1968. The average analyst target coming in had been $300, with 17 of 25 rating the stock a buy.

Krishna spent part of Tuesday on CNBC with Sara Eisen, blaming client distraction around cybersecurity, name-checking Anthropic’s Mythos model, and insisting “we don’t see our software being disrupted by AI.” That’s the position he has to hold. It’s also the position the market just repriced.

One bank cut its target within hours and told clients to buy IBM’s rivals in a basket. Another raised its target the same morning. The full earnings call is July 22. The reprice happened without it.

Sources