Shares of software and IT services companies plunged Tuesday after International Business Machines Corp. reported preliminary results that missed analyst expectations, reigniting questions about the sector.
IBM shares plummeted as much as 26%, on track for their biggest one-day drop since at least 1968 if the losses hold through the close. The company reported that it missed expectations because customers shifted capital spending from IBM’s products to chips and servers.
Software peers were dragged lower as Microsoft Corp. fell 2%, Workday Inc. dropped 6.3%, Salesforce Inc. shed 3.2%, and Autodesk Inc. slid 2.4%. US-listed shares of SAP SE fell 3.4%. The iShares Expanded Tech-Software Sector ETF, a proxy for the software sector, slumped as much as 2.7% before paring that decline.
Shares of IT services companies also tumbled with Accenture PLC dropping 2.9%, Cognizant Technology Solutions Corp. declining 2.2%, and Infosys Ltd falling 2.8%.
IBM’s results “will deliver a devastating blow to software/services stocks as investors will worry about the capex pivot negatively impacting the whole industry,” wrote Adam Crisafulli, founder of Vital Knowledge.
The company reported preliminary second-quarter revenue of $17.2 billion, short of the $17.9 billion Wall Street had been anticipating. Chief Executive Officer Arvind Krishna said IBM customers were holding back spending as they instead shifted their capital to components used in artificial intelligence infrastructure, including servers, storage, and memory.
