IBM shares plummet 27%:$69 billion in market value evaporated

Core Points

Contents

Core Points

Wall Street Reaction

Current valuation indicators

International Business Machines Corporation (IBM) shares plunged 27% in seven trading days to hit $212.67, approaching a 52-week low of $204.44.

Second-quarter revenue totaled $17.2 billion, well below analysts 'expectations of $17.86 billion.

The company's operating earnings per share were US$2.93, which fell short of market expectations.

CEO Alvin Krishner admitted there was a strategic failure in responding to the shift of corporate spending towards artificial intelligence infrastructure.

Wall Street institutions adjusted their forecasts: Stifel lowered its target price to $235 from $290, and JPMorgan lowered its forecast to $250.

International Business Machines Corporation suffered a brutal market sell-off. The technology giant's share price plunged more than 25% in one-day trading, the worst one-day decline in the company's history, and its market value evaporated by about $69 billion.

IBM shares are currently trading at $212.67, down 27% in the past seven days and hover near annual lows of $204.44.

The dramatic sell-off came after IBM released its preliminary second-quarter 2026 financial report, which showed results well below analyst consensus. Total revenue reached $17.2 billion, up only 1% year-on-year, while Wall Street's forecast was $17.86 billion.

The company's operating earnings per share were $2.93, which also fell short of analyst expectations.

CEO Alvin Krishner admitted in a letter to shareholders that the company had "made the wrong move" in responding to sudden changes in corporate technology spending patterns. Enterprise customers are reallocating capital expenditures to artificial intelligence hardware investments, postponing traditional software licensing agreements and mainframe upgrade cycles.

Krishner emphasized that basic business units, including Red Hat, are still growing, but this reassurance has not stopped investors from withdrawing.

Wall Street Reaction

Stifel maintains its buy rating, but significantly lowered its target price from $290 to $235. The research firm said it was uncertain whether the performance challenges were specific to IBM or whether they reflected broader industry headwinds, especially since the second-quarter earnings season had just begun.

JPMorgan Chase also lowered its price target to US$250 from a previously high level while maintaining an overweight rating. The investment bank emphasized that the deterioration of the mainframe business was a major concern.

Argus lowered its target price to US$280 while maintaining its buy rating. Oppenheimer took more decisive action, downgrading the stock from outperforming to equal. Bernstein maintains a flat rating with the broader market with a price target of $280.

Overall, nine Wall Street analysts have lowered their earnings forecasts after the preliminary results were announced.

Stifel also pointed out that there is increasing discussion in the market about a possible reorganization of IBM. The company conducted a category-and-aggregate valuation analysis but concluded that this scenario remained unlikely and that there was no obvious way to release shareholder value in the short term.

Current valuation indicators

Despite the sharp decline in stock prices, multiple indicators suggest that current price levels may be undervalued. GuruFocus calculates IBM's GF value at $239.23, indicating that the stock price is approximately 11% discounted to intrinsic value.

The company's current P/E ratio is 18.8, well below the five-year median of 25.18. Its comprehensive GF score is 81 out of 100 points, with strong profitability and valuation scores (8/10 and 10/10 respectively), but financial strength and momentum indicators score 5/10 each.

In the past three months, no company insiders have conducted any buy or sell operations.

Regarding future prospects, Stifel pointed out that IBM's third quarter is usually a season of seasonal weakness, while the fourth quarter has historically been strong. This pattern suggests that conclusive evidence of business stability may not appear until January 2027, when the company releases fourth-quarter results.

The technology company also recently launched three new artificial intelligence-enhanced products for its Power systems portfolio aimed at improving operational performance.