What Happened?
Shares of technology and consulting giant IBM (NYSE: IBM) fell 7.8% in the afternoon session after the company's second-quarter earnings report revealed that revenue from its software division missed analyst expectations, overshadowing an otherwise strong quarter. The technology giant surpassed Wall Street's forecasts for both overall revenue and profit. However, the underperformance in the crucial software segment raised concerns among investors about the growth trajectory for its key artificial intelligence (AI) and hybrid cloud businesses. Adding to the negative sentiment, CEO Arvind Krishna offered cautious commentary during the company's earnings call. This combination prompted a sell-off as the specific miss in a high-growth area outweighed the broader earnings beat.
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What Is The Market Telling Us
IBM’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 7.5% on the news that the company reported mixed first quarter 2025 results as a significant operating income miss weighed on the overall performance. On the other hand, IBM exceeded expectations for revenue, adjusted EPS, and EBITDA. Overall, we think this was a decent quarter, with some key metrics above expectations. The areas below expectations seem to be driving the move, and shares traded down.
IBM is up 18.6% since the beginning of the year, but at $260.90 per share, it is still trading 11.5% below its 52-week high of $294.78 from June 2025. Investors who bought $1,000 worth of IBM’s shares 5 years ago would now be looking at an investment worth $2,074.
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