IBM (NYSE:IBM) shares are under intense scrutiny as the company prepares to release its full second-quarter earnings report this Wednesday, coming off a staggering 26% weekly loss—the worst in its history. The plunge was triggered by a rare pre-announcement earlier this month, where IBM disclosed preliminary Q2 revenue of $17.2 billion, missing Wall Street’s $17.9 billion consensus, and adjusted earnings per share of $2.93 versus the expected $3.01.
The sell-off on July 14 was the largest single-day drop for the stock, wiping out nearly $70 billion in market capitalization. CEO Arvind Krishna attributed the shortfall to customers rapidly shifting budgets toward hardware ahead of anticipated price hikes, and numerous large deals failing to close on time. Infrastructure revenue fell 7% year-over-year, consulting was flat, and software grew just 5%.
Despite the grim pre-release, options markets are pricing in a roughly 7% move following the full earnings call. Investors are looking for clarity on whether delayed Q2 deals have moved into Q3 and if IBM can maintain its full-year targets of more than 5% constant-currency revenue growth and $1 billion in free cash flow improvement. Analysts at Jefferies maintained a Buy rating but cut the price target to $260 from $320.
Amid the earnings turmoil, IBM announced on July 21 an expansion of its quantum computing partnership with Singapore’s Digital and Intelligence Service (DIS) and the Defence Science and Technology Agency (DSTA). The collaboration aims to explore quantum applications for complex military logistics, mission planning, and resource allocation. IBM will provide access to its quantum resources and expert guidance, helping Singapore build local expertise in next-generation computing. The deal underscores IBM’s continued push into emerging technologies, though it did little to lift investor sentiment in the near term.
The broader market remains cautious. BNP Paribas analyst Stefan Slowinski noted that investors had been overpaying for low organic growth, while Mizuho’s Dan O’Regan said the selloff may ultimately be seen as an execution reset if AI and software momentum hold. IBM disclosed $12.5 billion in generative AI bookings, and updates on Red Hat, watsonx, and the AI pipeline will be critical during Wednesday’s call.
