IBM drops 25% after AI-linked earnings warning

IBM shares fell 25% on Tuesday after the company previewed quarterly results that were set to miss analyst expectations, with artificial intelligence cited as the cause, according to The New York Times’ DealBook. The drop marked IBM’s worst trading session since at least 1968 and weighed on shares of other large software companies.

The sell-off focused investor attention on established technology services and software groups whose businesses may be exposed to AI-led disruption. DealBook reported that the warning from IBM chief executive Arvind Krishna unsettled investors and raised questions about whether older software and services providers face further pressure as customers and competitors adopt AI tools.

Peer pressure across software

IBM’s decline affected sentiment beyond the company’s own shares. DealBook reported that Workday, ServiceNow and Salesforce were among the major software makers whose stocks were pulled lower after IBM’s update.

The mechanism is straightforward. When a large technology supplier signals that quarterly performance will fall short of what analysts had expected, investors reassess both that company’s earnings outlook and the assumptions used to value similar businesses. In this case, the stated link to AI made the reaction broader than a single-company earnings disappointment, according to DealBook’s account.

For software and consulting companies, AI can affect demand in more than one way. It may alter how clients buy technology services, how much work can be automated, and how investors assess the durability of existing revenue models. DealBook framed IBM’s warning as part of a renewed debate over whether AI will undermine portions of the incumbent software and technology consulting market.

AI risk returns to focus

The market reaction adds to earlier investor concern about AI’s effect on established technology companies. DealBook said fears over AI disruption had resurfaced, particularly for older software and services groups that rely on enterprise technology spending.

The report did not give detailed line items from IBM’s forthcoming quarterly results, such as revenue, profit or segment performance. The central market signal was the size of the share-price move and the company’s indication that results would fall materially below analysts’ expectations because of AI.

IBM’s 25% decline was significant for a company long viewed as a bellwether for enterprise technology spending. Whether the episode reflects a company-specific setback or a broader shift for software and consulting providers remains a question for investors, analysts and corporate buyers as more technology groups report results.

This story draws on original reporting from NYT DealBook.