Pushing its second-quarter revenue below market expectations, the company’s stock was down about 23% before the opening bell after IBM released preliminary quarterly results that missed analysts’ forecasts.

The decline also weighed on the entire software sector, with Dow futures falling and the iShares Expanded Tech-Software Sector ETF losing more than 4%.

IBM now expects second-quarter revenue of $17.2 billion, below the $17.86 billion analysts surveyed by LSEG had projected. Adjusted earnings per share are expected to reach $2.93, missing estimates of $3.02.

Chief Executive Officer Arvind Krishna admitted the company had failed to respond quickly enough to changing customer spending priorities.

“This quarter we faltered.”

He added: “We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.”

Krishna said IBM noticed a big shift in customer spending during the final weeks of June.

“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.”

He also said the company had expected some disruption from supply chain challenges but underestimated the scale of the change.

“While we anticipated some supply-chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritisation.”

The transition shows surging demand for hardware used in artificial intelligence systems. A global shortage of memory chips has also added to the problem.

Since late 2025, hardware prices have increased after major memory manufacturers, including Samsung, SK Hynix and Micron, directed more production towards specialised chips for AI data centres.

Much of that capacity has already been committed under long-term contracts, tightening supply for conventional servers, personal computers and smartphones.

Micron has previously warned that supply limitations are likely to continue.

“tight conditions to persist beyond calendar 2027 as a result of AI-driven demand across all segments coupled with structural supply constraints.”

IBM said revenue in its infrastructure business fell 7% during the quarter, even though total company revenue increased by 1% from a year earlier.

The disappointing update also hit other software companies. Microsoft, ServiceNow, Salesforce and Intuit each fell between 3% and 5% in premarket trading.

Chris Beauchamp, chief market analyst at IG Group, said investors are now watching closely to see how long businesses continue directing more of their technology budgets towards hardware and cybersecurity instead of software.

IBM is scheduled to release its full second-quarter financial results on July 22.

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The company introduced innovative solutions at its annual Think conference, focusing on integration and accessibility for businesses looking to deploy AI technologies effectively.

Chief Executive Arvind Krishna stated that IBM’s strategy revolves around facilitating the creation and integration of AI agents tailored to specific business needs.

“We help our clients integrate. We want to meet them where they are,” Krishna said, outlining how IBM’s tools could empower organisations to build AI agents quickly—within five minutes—using a combination of IBM’s proprietary models and offerings from other industry players, such as Meta Platforms and Mistral. 

The key aim is to bridge the gap for customers who use AI agents from various providers, like Salesforce, Workday, and Adobe, ensuring seamless integration across different platforms.

The tools introduced by IBM come as the company works to build a more diversified portfolio in the AI space. Last month, IBM reported securing $6 billion in business related to generative AI, a big one for the company. 

As Krishna explained, businesses are seeking AI models tailored to specific tasks, which in turn creates greater demand for IBM’s solutions. “All of these capabilities will only accelerate that rate of growth on those numbers,” he said, noting the potential for IBM’s tools to accelerate its expansion in the AI sector.

Despite facing competition from cloud providers like Amazon Web Services and Microsoft, IBM continues to carve out a niche with its focus on hybrid cloud solutions. 

This focus targets businesses that require multi-cloud or on-premise infrastructure, a segment that IBM has long been committed to serving. 

Krishna also reaffirmed the company’s focus on innovation, announcing that over the next five years, IBM would invest $150 billion in the United States. 

This investment will target areas such as mainframe computing, AI, and quantum computing, areas where IBM sees significant potential for growth. “Between mainframe, artificial intelligence and quantum computing, we think there’s going to be a very healthy market that behooves us to invest and lean in,” Krishna said.

The announcement aligns with IBM’s long-term strategy to ensure technological development in the U.S., an effort that will likely bolster the company’s presence in a highly competitive market. 

Added to these, Krishna noted that the regulatory environment under former President Donald Trump’s administration has created a favourable setting for businesses to thrive, providing the necessary conditions for IBM’s investment plans to succeed.

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Today’s news marks IBM’s first acquisition of 2023. Since Arvind Krishna became CEO in April 2020, IBM has acquired 30 companies to bolster its hybrid cloud and artificial intelligence (AI) capabilities.

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The rising adoption of hybrid cloud has resulted in data stored everywhere – in different types of data stores likes data warehouses, lakes, and lakehouses as well as across different clouds and on-premises environments.

APIs serve as the essential connector between different data sources and applications, which means that businesses are relying on and creating more APIs than ever before to get the data they need to power their applications and experiences.

GraphQL has rapidly become a go-to query language for companies to interact with their data and is emerging as a new standard for APIs, layering upon the investments in REST APIs and data systems.

Take an e-commerce application for example. With a single call, GraphQL can merge data that is found in different subsystems, like customer information, order numbers, and delivery status, and return it in an expected format.

This simplicity is why the popularity and usage of GraphQL is growing quickly. A report from Gartner predicted that by 2025, more than 50 percent of enterprises will use GraphQL in production, up from less than 10 percent in 2021. While GraphQL APIs are significantly easier for application teams to use, they can be challenging for the teams tasked with creating them.

Founded in 2020, StepZen provides an easier way for developers to build GraphQL APIs. StepZen takes a declarative programming approach (describing WHAT the program does, without explicitly specifying HOW), which results in smaller and more intuitive code, better runtime performance, and faster time to value.

StepZen was also designed to be highly flexible. It is compatible with other API approaches and is available as-a-Service (SaaS) while also supporting deployments in private clouds and on-premises data centers.

StepZen was developed by a team of industry veterans who have made key contributions to database technology including IBM Db2, PostgreSQL and Apache Derby, and have deep expertise in APIs and cloud-scale deployments.

The IBM acquisition closed on February 6, 2023, and the StepZen team and technology will become part of the IBM Software unit. Financial details of the deal were not disclosed.

StepZen is the latest example of how IBM is innovating through a combination of R&D and strategic acquisitions to deliver the data, AI, and automation solutions that businesses need in the hybrid cloud era.

StepZen complements IBM’s organic development in key areas including integration, API management, data fabric, and data management.

For example, IBM delivered new AI testing capabilities for IBM API Connect, which analyzes your APIs, generates test cases automatically, and reports any errors that it observes, helping improve code quality and developer productivity.

“We believe StepZen’s innovative technology for GraphQL API creation complements the innovations IBM is driving in API Connect to enable businesses to build better digital experiences for their clients”, the company said.

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