IBM stock tanks 25% on Q2 miss; corporate IT budgets shifting from software to AI security

IBM shares tumbled roughly 25% after the company preannounced disappointing Q2 results, with revenue, earnings, and software revenue growth all falling short of Wall Street expectations. CEO Arvind Krishna acknowledged the company "faltered" as several large customer deals failed to close on expected timelines.

CNBC analyst Jim Cramer identified a deeper trend: corporate IT budgets are being reshuffled away from traditional software toward three new priorities—cybersecurity, hardware, and AI "tokens" (consumption-based costs for using AI models). IBM has too many products and services in categories outside those three buckets, leaving it vulnerable to this spending shift even as it builds its AI narrative.

The miss underscores a structural change in how enterprises allocate technology budgets as AI adoption accelerates. IT managers are locking in 2027 spend plans around those three pillars. While IBM still has attractive long-term businesses and now yields over 3%, Cramer said the company will continue to hurt from this realignment and recommended waiting for evidence that deals are delayed, not canceled.

For architects: track how many of your customer cohorts are reprioriting spend toward AI security and governance versus traditional enterprise software. IBM's miss signals that legacy platforms are losing mindshare in the agentic era. Watch for other enterprise-software providers to issue similar guidance in coming earnings.