NEXT PICK · Market Insights
IBM plunged 25% in a single day: the worst day in history
Tuesday, July 14, 2026
The century-old blue giant has fallen on itself; whether the crash has been cleared remains to be seen on July 22
A century-old company that was listed in 1911, weathered the Great Depression, the internet bubble, and 2008, yesterday recorded its worst single-day drop ever—IBM closed at $217.07, down 25.21% in a single day, with trading volume expanding to 7.3 times the three-month daily average.
The previous closing price was still $290.23, wiping out about $70 billion in market value overnight, with a drop even surpassing the record set on Black Monday in 1987. So here's the question: Why would a company that countless people consider a defense target as "as stable as national debt" trend in this way?
|
Latest price
$217.07
▼ -25.21%
|
Market value evaporated in a single day
About $70 billion
▼ The worst single-day event in history
|
Dynamic P/E ratio
19.23 times
▼ After a sharp drop, it pulled back
|
It's not financial report fraud, it's that it "didn't keep up"
The trigger for the crash was a pre-disclosed second-quarter performance. IBM informed the market in advance that revenue was about $17.2 billion, below analysts' expectations of $17.85 billion; Operating earnings per share were $2.93, below the expected $3.01, and GAAP earnings per share also declined 2% year-over-year.
What really hits us is not the numbers themselves, but CEO Arvind Krishna's words—"We stumbled." He blames the weakness of the software and infrastructure business: customers are pulling money away from software and mainframes, pouring it all into AI servers and memory chips.
Management admitted they anticipated supply chain disruptions but "failed to anticipate the scale of this round of capital expenditure reordering," with several large orders not being signed on time. In other words, this AI wave didn't lift IBM; instead, it overturned it.
Before the market opened, HSBC even downgraded its rating ahead of time, adding fuel to the stampede. The full earnings report won't be released until after the market close on July 22, meaning the worst cut—a downward revision of the full-year guidance—is still hanging overhead.
A century-old veteran—what makes customers unable to leave it?
IBM's business is divided into four main segments: the software segment sells hybrid cloud and AI platforms, including watsonx, Red Hat OpenShift, and Db2 databases; The consulting segment focused on strategy implementation and application modernization, with service revenue of $7.69 billion in Q1, up 9.5% year-on-year; The infrastructure sector sells servers and storage; The financing segment provides customers with hardware and software as an advance in funding.
Looking at the full year, FY2025 revenue was $67.53 billion, up 6.34% year-on-year, net profit $10.59 billion, a year-on-year surge of 76%, with net margin soaring to 15.7%. The size of this plate set means it is naturally a mature cash cow.
So what makes it so hard for customers to leave? The answer lies in three places: first, government access qualifications—federal contracts like DoD, GSA, DHS, SSA, which require decades to accumulate; Second, deep embedding—enterprises run key systems on their platform, and migrating once is extremely damaging; Third, a cooperative network woven with AWS, Microsoft, Oracle, SAP, and Salesforce.
If we compare cloud-native elites to lightly deployed special forces, IBM is more like a fortress built for a hundred years—impossible to break in, but also not fast to escape. This sharp drop precisely exposed the weakness of "not running fast."
The plunge killed the premium, but the risk was still injected
After the crash, based on FY2025 earnings per share of $11.17, IBM's price-to-earnings ratio fell to just over 19 times, which is moderately low within the technology services sector. Technically, it is extremely oversold: RSI has dropped to around 30, and the stock price has briefly fallen about 21% below the 200-day moving average.
The cash flow side remains strong. FY2025 free cash flow will be $13.19 billion, with a free cash flow yield of about 8.57%, far higher than the current U.S. Treasury yield of four to five percentage points; Return on equity is 18.78%, and shareholder returns are not bad. Looking at these alone, it seems like a value stock that was wrongly killed.
But let me ask the other way around
Can the denominator of a 19x P/E ratio still be trusted? The 76% net profit growth rate in FY2025 was a one-time recovery on a low base, with Q2 operating earnings per share at only $2.93. If the full-year guidance is revised downward, valuations that look cheap today may not be so cheap tomorrow.
Cash flow serves as a downside buffer, but $57.71 billion in long-term debt and $74.71 billion in goodwill, which accounts for nearly half of total assets, are two swords hanging over net assets. Cheap and dangerous, this time packed together at the same price point.
The moving averages have already reversed, and the market is repricing "maturity."
From a fundamental perspective, IBM is a typical mature company: a huge revenue base, single-digit growth, stable profits, ample cash flow, and deep moat, but the growth ceiling is obvious. Federal contracts like SSA, DHS, GSA, and DoD contribute stable but inelastic revenues.
And the market's attitude is written in the moving averages. The 50-day moving average is $262.9, the 200-day moving average is $275.23, and now at $217, a bearish candlestick has broken through all medium- to long-term support, completely breaking the trend structure.
So, does the market still recognize this "mature and steady" story? At least yesterday, it didn't admit it—the signal it sends is: a company treated as a ballast stone, once it can't even maintain its maturity stability, valuation discounts will come quickly and fiercely.
They tried to take full stacks, but were besieged by pros on every level
IBM's competitors can be divided into three layers. The infrastructure and platform layer includes hyperscale cloud providers like AWS, Microsoft Azure, and Google Cloud; The application software layer includes Oracle, SAP, and Salesforce; At the consulting and system integration layer, Accenture and Deloitte are competing head-on.
The awkward part is that it wants to cover the full stack, but in every segment, it faces a more focused and faster competitor. Microsoft invests over $20 billion annually in R&D, and the ecosystem synergy of Azure plus GitHub and OpenAI creates an iteration speed IBM finds hard to match; AWS's scale and cost advantages are steadily expanding into the heartland of governments and enterprises.
And the script for this crash itself is the best footnote
Customers' budgets haven't disappeared; instead, they've shifted from IBM's specialized software and mainframes to AI computing power dominated by cloud providers. The moat can block others' attacks, but it can't stop customers from changing lanes themselves—that's the most painful part.
The cake is growing, but the piece it can bite into shrinks
The global IT services market is a trillion-yuan market, with a scale of about $1.3 to $1.5 trillion in 2024, expected to grow to $1.8 to $2.0 trillion by 2027, with a compound annual growth rate of six to eight percentage points. Among them, hybrid cloud and AI platforms are the fastest-growing segment, with annual growth rates exceeding 15%, but competition is also fiercest.
IBM's annual revenue of $67.53 billion holds about five to six percentage points of the global share. The market is growing, and most of the potential dividends have been taken by cloud giants. When industry growth is all rushing toward AI computing power, and IBM proves to be "lagging behind" in this track, the ceiling issue shifts from a long-term concern to a near-term concern.
Wrongly killed, and still a value hollow
Putting aside the day's panic, the logic of the bulls is not without a fulcrum; the key is whether the Q2 earnings report proves this is just a setback rather than a trend reversal:
| ▲ Bull Case |
| ① | FY2025 net profit was $10.59 billion, up 76% year-on-year, with net profit margin rising from 9.6% to 15.7%, showing real improvement in earnings quality |
| ② | Free cash flow was $13.19 billion, with a free cash flow yield of about 8.57%, far exceeding U.S. Treasuries and providing solid downside protection |
| ③ | After the plunge, the price-to-earnings ratio is about 19 times, placing it in the mid-to-low range of the technology services sector, with the RSI falling below 30 indicating extreme oversoldness |
| ④ | Government contracts form strategic cooperation networks with AWS, Microsoft, SAP, and others, forming a defensive moat that is difficult to replicate |
| ⑤ | With a return on equity of 18.78% and stable dividends, it remains attractive to long-term value funds such as pensions |
The risk hasn't been cleared yet, so don't rush to take the knife
The bears' concerns are equally specific and mostly point to an unresolved answer—the full earnings report for July 22:
| ▼ Bear Case |
| ① | Q2 operating earnings per share were only $2.93 and revenue was 17.2 billion, both below expectations, and the risk of downward revision of full-year guidance remains uncertain |
| ② | The CEO personally admitted that "multiple large orders were not signed on time," and that execution issues cannot be fixed in just one quarter |
| ③ | IBM warned that on that day, enterprise software stocks like WDAY and NOW also fell simultaneously, suggesting that enterprise IT spending contraction may be systemic |
| ④ | $74.71 billion in goodwill accounts for nearly half of total assets. If M&A synergy falls short of expectations, impairment and profit revisions will suffer a double blow |
| ⑤ | $57.71 billion in long-term debt combined with a high interest rate environment continues to erode already stressed profits |
All eyes are on July[22]
This pre-disclosure is just the appetizer; what truly determines the next step in the stock price are the following key moments:
| • | After market closed on July 22: Complete Q2 financial report and full-year guidance—is this the turning point between 'all negative news has been exhausted' or 'a second bottom'? |
| • | Going forward, let's observe whether enterprise software and infrastructure spending has bottomed out, and whether the rescheduling of AI capital expenditures can in turn benefit IBM |
| • | Whether large orders from hybrid cloud and Watsonx platforms can be re-checked will verify whether execution has been restored |
From the $250 high to overnight return to square one
Over the past year or so, IBM has actually gone through a period of triumphant growth. In 2025, the results of AI transformation are being realized, with net profit up 76% year-on-year, and the stock price climbing from around $180 to a historic high above $250, with free cash flow yields attracting a large amount of value capital.
Q1 revenue was 15.92 billion yuan, up 9.5% year-on-year, marking several consecutive quarters of upward growth, and the market once believed this old elephant had truly learned to dance. Currently, the 52-week high is still at $332, but yesterday's close has fallen back to $217, a drawdown of more than 40% from the peak.
A preliminary disclosure almost reverted the valuation of the entire year back to its original state. History repeatedly reminds us of the same thing: IBM's stock price has long been suppressed by the narrative of a "growth ceiling," and any execution mistake will cause the market to unhesitatingly withdraw the premium.
|
⚠️ Risk Notice
|
|
🟡 Neutral Execution mistakes are real, and the benefits are real, but the risks will only be revealed on the 22nd. |
|
💬 Discussion Don't blindly take the knife before the financial report. Its current real-time buy and sell prices and signals can be viewed on IBM's official account. |
Data source
| • | Source: NextPick real-time snapshot + IBM Q2 pre-disclosure and corporate earnings report + SEC announcement + mainstream financial media such as CNBC and Yahoo Finance. |