The IBM (IBM) turnaround just hit a major speed bump.
Shares of the tech giant crashed 20% in premarket trading after an unexpected pre-earnings warning from the company
The numbers: IBM sees second quarter sales of $17.2 billion versus analyst estimates of $17.85 billion. Non-GAAP earnings are expected to be $2.93 compared to estimates of $3.02. What’s behind the move: IBM CEO Arvind Krishna had this to say in a letter to investors on the shortfall: “When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter.
Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter. “What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. 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. This dynamic impacted client buying patterns.