IBM warning shows AI infrastructure is eating into software budgets
IBM's preliminary second-quarter miss showed customers shifting spending toward servers, storage and memory for AI infrastructure. The warning hit IBM shares and raised a sharper question for enterprise software vendors: whether AI budgets are expanding the market or cannibalizing it.
IBM warns AI boom squeezing software budgets; shares sink in sector rout
IBM Suffers Worst Day Since Black Monday as AI Chip Shortage Drains Software Spending
IBM Plunges Most Since 1987 After Q2 Revenue Miss, Dragging ServiceNow and Accenture Lower
IBM warns AI boom is squeezing software budgets, triggers sector rout
IBM warns AI boom is squeezing software budgets, triggers sector rout | Artificial Intelligence News
IBM jolted enterprise software shares on Tuesday after its preliminary second-quarter numbers showed that the AI infrastructure boom is pulling customer budgets away from software and services faster than the company expected. The company said revenue would be $17.2 billion, below the $17.86 billion Wall Street estimate, while adjusted earnings per share would be $2.93 versus an expected $3.02.[0]
Chief Executive Arvind Krishna told investors that customers shifted late-June capital spending toward servers, storage and memory to lock down supply-constrained hardware before expected price increases. IBM said it had anticipated some supply-chain pressure but not the size of the budget reprioritization, and Krishna wrote that “numerous large deals” failed to close on expected timelines.reuters
The reaction was swift because the miss landed at the intersection of two concerns: whether AI tools will pressure traditional software demand, and whether the rush to buy AI-ready infrastructure is crowding out other IT spending. IBM shares fell as much as 25% on Tuesday, while ServiceNow and Accenture also dropped as investors looked for similar spending stress across enterprise software and consulting.techtimes
IBM’s own numbers were mixed rather than uniformly weak. Software revenue still rose 5%, Red Hat grew 11%, consulting was roughly flat, and distributed infrastructure posted record reported growth as customers bought Power servers and storage. The problem was concentrated in mainframe-linked infrastructure and transaction-processing software, where delayed purchases hit both hardware and the software stack tied to it.biggo
The next test comes July 22, when IBM is scheduled to release full results and discuss its full-year outlook. A one-quarter hardware pull-forward would be painful but containable; a longer shift toward servers, memory and cybersecurity would be a bigger warning for software vendors counting on AI to expand budgets rather than consume them.economictimes
5 sources
reuters
IBM warns AI boom squeezing software budgets; shares sink in sector rout
IBM said it had faltered as clients shifted spending from software to data-center infrastructure and forecast revenue below estimates.
techtimes
IBM Suffers Worst Day Since Black Monday as AI Chip Shortage Drains Software Spending
IBM reported preliminary Q2 2026 revenue of $17.2 billion and described late-June budget shifts toward servers, storage and memory.
finance.biggo
IBM Plunges Most Since 1987 After Q2 Revenue Miss, Dragging ServiceNow and Accenture Lower
IBM shares plunged as much as 25% and the warning dragged ServiceNow and Accenture lower.
economictimes.indiatimes
IBM warns AI boom is squeezing software budgets, triggers sector rout
IBM's preliminary results included 5% software growth and weakness tied to infrastructure and mainframe demand.
business-standard
IBM warns AI boom is squeezing software budgets, triggers sector rout | Artificial Intelligence News
IBM is expected to report full second-quarter results on July 22 after warning that clients favored data-center infrastructure spending over software.