IBM Stock Collapses After a Grave Warning About AI (fastcompany.com) 62
IBM shares plunged after the company warned that Q2 revenue and earnings would miss expectations, blaming customers' sudden shift in spending toward AI hardware instead of software services. However, CEO Arvind Krishna did not place all the blame on IBM's customers. The CEO also said it "faltered" by failing to "anticipate the magnitude of the capex reprioritization."
"These conditions require our teams to execute perfectly, and this quarter we faltered. 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." Fast Company reports: In the preliminary report, IBM said that for its second quarter of fiscal 2026, it expects revenue of $17.2 billion, which is up 1%. It also said it expects a Non-GAAP Diluted Earnings Per Share (EPS) of $2.93, up 5%. However, as noted by CNBC, these preliminary results are below what analysts were expecting, which was $17.86 billion in revenue, and an EPS of $3.01, according to FactSet data.
"These conditions require our teams to execute perfectly, and this quarter we faltered. 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." Fast Company reports: In the preliminary report, IBM said that for its second quarter of fiscal 2026, it expects revenue of $17.2 billion, which is up 1%. It also said it expects a Non-GAAP Diluted Earnings Per Share (EPS) of $2.93, up 5%. However, as noted by CNBC, these preliminary results are below what analysts were expecting, which was $17.86 billion in revenue, and an EPS of $3.01, according to FactSet data.
The company is worth 24% less (Score:3)
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"Missed it by so close!"
– Obligatory Mariner Smart quote
Imploding or exploding? Which is funnier? (Score:2)
"Missed it by so close!"
– Obligatory Mariner Smart quote
Don't you mean "Missed it by that much"? And Max Smart?
However the reference is still weak because he was using his hand to indicate a small distance, which should be a "this" reference. Where is "that" supposed to be pointing?
I think we had better jokes in those days. Possibly somehow related to IBM's days of glory? I still meet or hear from some Big Blue folks from time to time. I don't think any of us can understand what happened to the company...
As regards this story, it will only be funny if IBM someho
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Thanks for reminding me of a company named IBM! Quantum Computer? If such a thing were to be built so as to manage to solve a real world problem, I bet it will not come from IBM. Even if they do, they will price it 5x their nearest competitor who has better wares than IBM.
On a different note, is Arvind Krishna CEO #35 there? How many CEOs do they currently have?
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It's worth a percent or two more than it was in May. Does that seem severe? Maybe what happened in between was the weird bit.
AI agents replacing "software services”? (Score:3)
Perhaps one day IBM stock will skyrocket when they say they will be selling quantum computers.
Note they were not citing hardware sales as the problem, rather they cited "software services”. I think the fear is that AI agents might replace many of those services.
IBM shifted from being a hardware company to a software and services company in the 1990s. Today hardware is about 10% of their revenue. They still dominate mainframes, and that is more of a computational niche than a cloud thing. So yeah the mythical quantum computer could be a lifesaver for them assuming they migrate back towards t
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Honestly, IBM would do well to just stick to their course. This AI thing is due for a pretty severe market adjustment to bring some rationality back into the tech decision makingl, We're already seeing a lot of companies shitting the bed over token costs and realiseing they laying off the entire tech staff would just cost them more. And this flows on.
Or this is wishful thinking on the part of myself, a 50yo whos been feeling a lot less secure about my future job prospects lately if I dont stop rejecting any
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I think it is becoming more and more obvious that LLMs are just another, relatively small improvement of things. Like happened with all the other AI hypes before. Useful? Yes. Complete game-changer? No. And it is not only that running these models is far too expensive and that is several years in.
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I think it is becoming more and more obvious that LLMs are just another, relatively small improvement of things. Like happened with all the other AI hypes before. Useful? Yes. Complete game-changer? No. And it is not only that running these models is far too expensive and that is several years in.
It is funny how you have had to move the goalposts all the time in your trolling against AI. At least you are now admitting that LLMs are useful, which was hard for you earlier.
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I have not moved the goalposts at all. And I have stated right from the start that they are useful as better search. There seems to be a rather severe problem with your perception.
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Those that hyper about porting COBOL to other stuff miss one of the main reasons why many are still on that stuff - because they have zillions of lines of code AND don't want to rewrite and retest zillions of lines of code every few years.
I'm not sure why Cobol code needs to be ported. College trained computer programmers tend to come from three schools. The School of Science, a Computer Science degree. The School of Business, a Computer Information Systems degree. The School of Engineering, a Computer Engineering degree. Note, degree names are not standardized.
So a large chunk of the formally trained are already, conceptually, leaning toward large scale Corporate and Government style projects. Learning the Cobol language itself is a rela
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I wonder if quantum computing will advance AI?
Hahahaha, no. QCs (if they ever work) are exceptionally slow and computations needs lots of set-up and repetitions. Completely unusable for anything even remotely real-time. Also, QCs only can do tiny computations (if they ever even can do those) that need to have special mathematical properties to make them worthwhile.
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"I think there is a world market for maybe five quantum computers," said some esteemed IBM Chairman.
The bullwhip effect on supply chains (Score:2)
Everyone is worried about securing memory since AI servers are hoovering up a huge amount, plus all the spending on AI capex for data centers in general. This is all going to crash soon; Ed Zitron has the receipts at his blog: https://www.wheresyoured.at/le... [wheresyoured.at]
Practically speaking, this means that small perturbations in the supply chain pricing will have huge downstream effects. IBM's stock price is one of the first hints at what is to come.
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Bloggers telling us WHEN AI will crash is useful.
So pray let us know which bloggers have done that, and what date they have set.
THEN we can see who are the geniuses, and who are the charlatans.
Re:The bullwhip effect on supply chains (Score:5, Insightful)
When is a hard question. Rationally it should never have blown up this much in the first place (some expansion would be rational, but not like we've seen). Clearly the minds driving this are not rational.
Insanity is notoriously hard to predict. That's why short selling is so risky. The market can clearly remain irrational longer than most people can remain solvent when betting against it.
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That's an interesting question. Have you tried putting it to AI? I did. The response had helpful links embedded in it, but they did not copy over when I pasted it here into slashdot. Editing this post was already more work than I really wanted to put into this, so, unfortunately, you get no supporting links. However, if you ask this of Gemini yourself, you will get the supporting links.
Here is what Gemini has to say:
While "predicting a crash" in any market is notoriously difficult, several highly respe
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Each of those answers came from a different source. And the world has many sources to consult.
This answer might not be as simple and easy as one would like, but it's what's available from these sources.
Re: The bullwhip effect on supply chains (Score:3)
good self awareness (Score:2)
Faltered is right. Isn't IBM a hardware company among other things? Why didn't they have a hardware product to offer customers who wanted to experiment with throwing away money?
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IBM couldn't get a deal with Nvidia to use Nvidia $$$ to buy Nvidia systems and then 'Step 2. ???' so everyone profits?!
Re:good self awareness (Score:5, Interesting)
I don't know the details, but IBM has been switching its emphasis from hardware to services for quite a while. They sold off their Lenovo brand in 2014.
Lots more profit in services, as any customer who has had the misfortune to hire them has (to their sorrow) found. Like the Quebec Ministry of Transport, whose project to digitize car and driver licensing is years late and has topped $1.1 billion. Yes, billion. Thanks IBM (and SAP)!
Re: good self awareness (Score:1)
IBM has been more of a services company than a hardware company for decades, it's true. And yet, they are still a hardware company despite that, and their hardware is supposed to back up their services.
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Their hardware though is just refresh fodder for mainframe/mini/aix. Sure they toss it some concessions to hype but ultimately customers are currently looking for the most cost effective platform to enable running stuff on nVidia Blackwell, and IBM isn't even vaguely in that game, not since a brief time with POWER9 where they tried to foster a close nVidia relationship.
No fab, no x86 systems, no resell of third party stuff that would work for getting in on Grace/Vera based systems. There's not really an a
Re: good self awareness (Score:2)
People would believe in the hardware if they put it out, because IBM is not really known for exaggerating specs. But they don't seem to be able to.
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They would have a very uphill battle.
For the common customer, it's generally 'nvidia or bust'. That being said, supply chain limitations might have people looking for a more affordable and accessible option, which isn't exactly a huge appealing prospect for IBM, particularly since the market has AMD trying to already fill that niche. General problem is it isn't just about specs, if it isn't CUDA then people are just not confident.
IBM hasn't really been known for in-house top performance in about 20 years.
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They sold off their Lenovo brand in 2014.
Lenovo was never an "IBM brand." IBM sold them their client computing assets in 2005, and their x86 server assets in 2014, but Lenovo has never been a part of IBM.
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I don't know the details, but IBM has been switching its emphasis from hardware to services for quite a while. They sold off their Lenovo brand in 2014.
I think you meant "sold off their brand to Lenovo", they did that with their consumer brand years earlier but then later sold off their x86 server division as well. Lenovo laptops are still good but being Chinese owned is strictly verboten for anything that might be secure in the UK and US... So I've not seen an IBM (or Lenovo) server in years and can't comment if they're still as good as the old IBM X servers.
Re:good self awareness (Score:5, Interesting)
Good question. Their POWER series of CPUs were not insignificant in capability, their chip designers were clearly technically sophisticated, and GPUs are just specialised vector processors with a few extra bells and whistles - stuff IBM is extremely familiar with.
It would not have been difficult to release a GPU or other LLM-specific processor to go along with the POWER11. They'd been working on the POWER11 for 4 years, they knew in 2020 that LLMs had a strong potential to be significant for Big Data processing - an area you use big iron for, they're not rank amateurs, they have plenty of reserve, they could have assembled an emergency team to build a vector processor that was custom-designed for just LLM work, and released an LLM processor card that could run circles around nVidia.
They didn't. Because, as has happened before, their management is simply too stupid and too slow.
Re:good self awareness (Score:4, Insightful)
This.
Culturally it would have been a big shift, even given the talent they have, but they just don't have the courage of leadership it would have taken to do this. It's been 60+ years since IBM had that, when they bet the company on the 360. The PC doesn't count; that was essentially a side project for IBM. They didn't create the hardware or software for it, and the companies future wasn't riding on it.
Re:good self awareness (Score:4, Interesting)
PC succeeded pretty much because IBM broadly didn't take it seriously. If IBM believed in the market opportunity, they would have screwed it up by making it all in-house and proprietary. See when it did start to get traction and they decided to try to lock it down with MCA.
Re: good self awareness (Score:2)
MCA was mind boggling. IBM is exactly not known for being cheap, and yet that's exactly what they did with MCA autoconfiguration by using floppies instead of ROM. Meanwhile they used a very expensive card edge connector when there was really no good reason to do so. It's truly insane.
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Why MCA?
Saving money on ROM
Will not help you for long...
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IBM has offloaded the hardware that would have had them most relevant to the boom. They basically just have hardware to cater to long term mainframe and AIX customers. Even many of those customers are probably deciding to postpone their IBM hardware refresh to secure more hype-compatible gear from other vendors.
IBM chased what they saw as more plush software and services margins and chopped away to fixate on those fronts, except the locked in mainframe/mini/aix customers that they can keep gouging without
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Yes. Pretty clear leadership failure IMO. And now they are paying for it.
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Isn't IBM a hardware company among other things?
It's a part of their business, but not a majority of it, even before AI. They've added AI coprocessors to their Telum CPUs for their Z series platform, but it's not a significant player in the world of AI money. More of a checkbox me-too thing that probably will be of use for legacy customer applications, but no one is building data centers full of Telums to compete with OpenAIAnthropticGoogleEtc.
IBM's answer will be: chop chop chop (Score:5, Interesting)
Layoffs are coming.
Historically this is what IBM has done in the past to improve profitability.
I view this current debacle as a failure on management's part to see what might be coming up in the sector as emerging tech just like layoffs are a failure of management to properly size the company and select the proper roles which drive growth and ultimately profitability.
Will management pay with their heads? That ultimately depends on the board, and maybe the shareholders.
Re: IBM's answer will be: chop chop chop (Score:2)
It might actually turn out good for IBM if the bubble pops sooner than later. Then they get to look smart for not participating when all the AI stocks (and the stocks of any other company that bet big) slump.
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Indeed. And they are going to be called upon to help clean up the mess many people made going all in on LLMs ...
Buy the dip? (Score:3)
Any time a stock drops without a BIG reason, time to trade on the dip
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Mind the falling knives. You don't want to catch those.
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Yes, and the same thing was said about United health and Crowdstrike after their dips for bigger reasons.. These are fairly solid companies with real established sales and customers.
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Indeed - I bought United Health on their big dip - it's up more than 35% since then
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fails to read a shifting market.. again (Score:2)
Remember that time IBM didn't anticipate the money being in pro services and software and stuck with hardware..
It's temporary. (Score:5, Insightful)
IBM is still in fine shape. The company is not losing money. Revenue did not fall off a cliff like the stock price did. If they're smart IBM can wait this out and quietly prepare for things to bounce back when the insane AI capex ends and people need something IBM is ready to provide. (But, realistically, IBM will just lay off 25,000 good people instead of putting human capital to good use as part of a long term strategy.)
Indian Bumbling Manipulators (IBM) (Score:5, Insightful)
Any IBM project I've seen in the last two decades has been filled with outsourced Indian consultants that put in the hours warning their chairs and accomplish nothing only to be replaced by another bumbling Indian to do the same when there is no progress and complaints come in from management and new time extension contract needs to be signed for when time and materials exceed the estimated costs until the project fails.
IBM SameTime, Lotus Notes Mail server upgrades, Z/OS migrations, x390 upgrades, P-Series hardware refresh, TADDM CMDB inventory, BigFix patch management failures, and the list goes on. All IBM products and projects that I've had to help fix, implement, maintain until replacements can be installed and IBM garbage ripped out.
Teaching IBM mainframe consultants how to FTP files to their mainframe filesystem partitions to upgrade the z/OS shows how low that company is sunk after it moved to India since it fired all of their local US talent and mainframe guys.
Any project that IBM touches goes IBM Blue(TM) from asphyxiation and withers away and dies.
Now they are losing to AI on their inept services and software projects after failing to anticipate that is just par per course for their consulting business. Just as bad as Deloitte.
Microsoft is following on their heels now also, full of outsources and offshored Indians and people wonder why Windows 11 sucks so hard?!
The US techies are left scrambling for the few leftover IT jobs here to be taken over by AI after they implement the death knell for their back-office working bretherent. They are building their own AI terminators, first for the non techies who are the clerks and analysts, but then for themselves to snipe each other out of the few remaining jobs in the future maintaining the AI IT infrastructure.
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Being from India is not to blame, it's being clueless and distant about the business at hand. The worst software I have made is when I didn't understand the domain side.
less to do with AI... (Score:2)
and perhaps more to do with them failing to shake down their customers for incremental subscription-based revenue streams. Confronted with heavy handed "we're bundling all this extra stuff you don't want or use in with whatever you currently have and we're going to charge you more for all that 'additional value you're getting'....even if you've been shrinking your overall IBM hardware/software footprint."
Hard pass.
IBM didn't jump on the AI bandwagon? So what? (Score:1)
The AI craze is quite l00ny ... (Score:2)
... to begin with. Why I don't quite get is that many people seem to be unaware of how quickly LLMs will be optimized to run on quasi-regular hardware, not needing the insane datacenters primarly used for training. AI _is_ a revolutionary tech, no doubt, but there also is a bubble that likely is about to pop.
unreliable winds (Score:2)
IBM reinvented itself as a software services company, not a hardware company. Now it is being screwed by hardware companies. Always behind the times.