Big Blue has faced the largest loss in history.

The giant IBM saw its stock plummet by 25% in just a few hours, burning approximately $70 billion. The negative result stems from a revision of Q2 targets: IBM has announced it expects to achieve "only" $17.2 billion in revenue, against the $17.8 billion expected by analysts. And AI plays a role in this.

Why is AI dragging down tech software and services?

A decrease of $600 million on a projected turnover of $17.8 billion can be considered a normal fluctuation. Nothing to worry about, on paper. Yet, the market reacted very negatively, leading to the largest stock market crash in the entire history of Big Blue.

Is it the usual bad and selfish finance, or is there more? In reality, investors are not so much concerned about the downward revision as they are about the reasons behind it, explained in a letter to investors from CEO Arvind Krishna.

"In the last weeks of June, we observed a shift in customer capital expenditure (capex) toward purchasing servers, storage systems, and memory, aiming to secure infrastructure characterized by limited availability before the expected price increases," explains the manager. "This dynamic has altered customer buying patterns. Although we had already considered some supply chain impact in our forecasts, we did not anticipate such a significant change in the reallocation of capital expenditure."

In short, customers are shifting their capital investments toward hardware, thereby reducing spending on software as a service, particularly the software stack related to the Z series mainframes.

A predicted decline, it must be said, but of a magnitude well beyond what was estimated.

"Although we had already taken into account some supply chain impact in our forecasts, we did not foresee a reallocation of capex spending of this scale," explains Krishna. He adds, "furthermore, during the quarter, customer attention was absorbed by rapidly evolving cybersecurity concerns affecting the entire sector."

The manager does not deny the company’s mistakes:

"These conditions require flawless execution from our teams, but in this quarter, we have not met expectations. We failed to adapt and respond quickly enough, and numerous large deals did not conclude in the expected timeframes, resulting in most of the deviation from our targets."

IBM's collapse drags down software and consulting

The reduction in SaaS investments has had a significant impact on other companies offering software as a service. ServiceNow saw its shares plummet by about 5%, as did Workday, while Adobe recorded a -9%. Consulting firms have also been affected: Accenture has dropped by 4%.