What Went Wrong at IBM? A 27% Drop and $69 Billion Gone in a Week

TLDR

• IBM stock has dropped 27% over the past week to $212.67, near its 52-week low of $204.44
• Q2 revenue came in at $17.2 billion, missing the $17.86 billion consensus estimate
• Operating EPS of $2.93 also fell below expectations
• CEO Arvind Krishna admitted the company misstepped in adapting to corporate IT budget shifts toward AI hardware
• Stifel cut its price target to $235 from $290, while JPMorgan lowered its target to $250

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IBM stock has taken a beating. The tech giant’s stock fell over 25% in a single day — the largest one-day drop in the company’s history — wiping out roughly $69 billion in market cap.

International Business Machines Corporation, IBM

The stock now sits at $212.67, down 27% over the past week and trading close to its 52-week low of $204.44.

The sell-off was triggered by IBM’s preliminary Q2 2026 results, which came in well below Wall Street expectations. Revenue landed at $17.2 billion, a slim 1% increase year-over-year, against estimates of $17.86 billion.

Operating earnings per share came in at $2.93, also below what analysts had expected.

CEO Arvind Krishna wrote to investors acknowledging the company “misstepped” in adapting to a sudden shift in corporate IT budgets. Enterprises have been redirecting capital toward AI-related hardware, pushing back traditional software and mainframe contracts.

Krishna noted that core businesses like Red Hat are still growing, but that wasn’t enough to calm investors.

Analyst Reaction

Stifel maintained its Buy rating but slashed its price target from $290 to $235. The firm said it remains unclear whether the weakness is unique to IBM or a broader industry trend, given Q2 reporting has just begun.

JPMorgan also trimmed its price target, moving it to $250 from a higher level, while keeping an Overweight rating. The firm flagged mainframe weakness as a key concern.

Argus cut its target to $280 but held its Buy rating. Oppenheimer went further, downgrading IBM from Outperform to Perform. Bernstein stayed at Market Perform with a $280 target.

In total, nine analysts have revised their earnings estimates downward following the pre-release.

Stifel also flagged renewed speculation about a potential breakup of IBM. The firm ran a sum-of-the-parts analysis but said the scenario carries low probability, with no clear path to immediate value creation.

Valuation Picture

Despite the drop, some metrics suggest the stock may be cheap at current levels. GuruFocus puts IBM’s GF Value at $239.23, implying the stock is roughly 11% undervalued at current prices.

IBM’s P/E ratio stands at 18.8x, well below its five-year median of 25.18x. Its GF Score is 81 out of 100, with strong marks in profitability (8/10) and valuation (10/10), though financial strength and momentum both sit at 5/10.

No insider buying or selling has been reported in the past three months.

Looking ahead, Stifel noted that Q3 is seasonally weak for IBM, and Q4 is seasonally strong. That means meaningful clarity on recovery may not come until IBM’s Q4 report in January 2027.

IBM also recently launched three new AI-powered products for its Power systems, aimed at improving operational efficiency.