IBM Disappoints with Quarterly Revenue and Pulls Software Stocks Down

On the stock exchange, the figures caused a shock. IBM shares dropped by more than a fifth in pre-market US trading and weighed on software stocks such as those of Microsoft and SAP. The stock lost around 23 percent in value at times. IBM had unusually released the preliminary business figures ahead of the originally scheduled date.

Krishna Explains the Slump with Pull-Forward Purchases

IBM CEO Arvind Krishna explained the decline in a letter to shareholders with a short-term shift in customer budgets. Accordingly, customers had increasingly purchased servers, storage and memory chips in the final weeks of June in order to preempt expected price increases resulting from supply bottlenecks. IBM had not anticipated the extent of this shift.

The background is a continuing shortage of memory chips, which is being exacerbated by the rapid expansion of data centers for artificial intelligence. Prices for these components have risen significantly because they are needed both in AI servers and in classic enterprise data centers.

Chip Shortages and AI Concerns as Background

At the same time, market participants are concerned that new AI capabilities could put parts of the classic software business under pressure in the medium term, which is a central pillar for IBM. Krishna had aligned the group more strongly with software in recent years, also through multi-billion-dollar acquisitions.

The IBM stock reacted to the news with one of the largest price drops in recent years. The loss of more than a fifth of market value at times also dragged down other software titles. Microsoft and SAP were among the named stocks that suffered under the IBM signal.

During the course of the day it became apparent that investors were reading the IBM figures as an indicator for the entire software industry. Should the trend continue, this is likely to bring the reports of other large software manufacturers more sharply into focus in the coming weeks. The group also pointed out that the third quarter could cushion the impact of the pull-forward purchases.

Signal Effect for the Entire Software Industry

The news from Armonk caused waves because IBM is considered one of the first major IT groups of the current reporting period with its quarterly reports. Weak or unclear signals at the start of the season can sustainably shift expectations for competitors such as Microsoft, SAP or Oracle. Market observers interpreted the move to publish prematurely as an admission that the situation is more serious than initially assumed.

Alongside the IBM special situation, investors are currently observing a series of other corporate announcements. US major bank Goldman Sachs increased its quarterly surplus by around 78 percent to a good 6.6 billion dollars thanks to strong trading business and managed to gain around two percent pre-market. The bank's total revenues grew by 39 percent to 20.3 billion dollars.

US Major Banks Paint a Different Picture

JPMorgan also benefited in the second quarter from special income from its stake in credit card provider Visa and increased its surplus year-on-year by 41 percent to just under 21.2 billion US dollars (18.6 billion euros). Bank boss Jamie Dimon now expects higher net interest income for 2026 than previously. Thus the large US banks paint a significantly more positive picture than the IT sector.

In the German economy, meanwhile, several companies attracted attention with their outlooks. The Hamburg liner shipping company Hapag-Lloyd now expects earnings before interest and taxes of between 0.1 billion and 1 billion euros and has thus significantly raised its forecast for the full year. Previously, the liner shipping company had expected an operating result of between -1.3 and 0.4 billion euros. The reason, according to the company, is higher transport prices and stronger demand.

German Companies with Mixed Outlooks

The Lübeck medical and safety technology group Drägerwerk was also more confident after a strong second quarter. The company slightly raised the lower end of the range of its annual forecast for operating margin. The Drägerwerk stock rose by 1.4 percent to 86.40 euros in early trading on Tuesday.

In contrast, the Hamburg biotech company Evotec significantly revised its outlook downward. Revenue of 570 to 610 million euros is expected for 2026, the company, listed in the SDAX, announced late on Monday evening. Evotec had previously assumed 700 to 780 million euros. Adjusted earnings before interest, taxes and depreciation (EBITDA) are now expected to be only minus 70 to minus 105 million euros. Most recently, the company had still hoped for 0 to plus 40 million euros.

The rail technology group Vossloh is somewhat more cautious for the current year due to overall economic and geopolitical uncertainties. The stock lost almost ten percent to 56.25 euros in early Tuesday trading. Truck and bus manufacturer Traton, on the other hand, performed better: adjusted operating result in the second quarter was 957 million euros, and adjusted operating return was 8.1 percent. Both are significantly above current market expectations. The stock rose by up to 3.1 percent on Tuesday. Most recently, it was up 0.6 percent.

Other reports from the economic and regulatory environment concerned the semiconductor location Germany, which, following a decision by the EU Commission, will in future be allowed to provide millions in funding for semiconductor factories. Bosch is also securing 225 million US dollars in funding for a new chip plant in the USA. Wind power pioneer Sowitec, meanwhile, filed for insolvency.

In the USA, a legal proceeding is meanwhile underway against the planned takeover of Warner Bros Discovery by Paramount Skydance. Twelve US states are going to court to prevent the takeover of the Hollywood veteran Warner Brothers by competitor Paramount. California Attorney General Rob Bonta warned that the merger of the two heavyweights would result in higher prices as well as fewer films and TV shows.

Outlook: What Matters Now for IBM

For IBM, it will now be crucial whether the company can convince the invested shareholders with the actual quarterly report. Should management convincingly classify the special effects from pull-forward purchases and the supply bottlenecks for chips, the nervousness in the markets could subside again. Otherwise, today is likely to be remembered as a turning point at which it became visible for the first time how closely the fate of classic software groups is linked to AI infrastructure.

Reports in context that are not at the center of IBM coverage were touched on at the margins. These include the news that Swiss competition authorities have opened proceedings against Google as well as the analysis that a quarter of EU electricity now comes from solar energy. The Novartis group meanwhile received approval in Canada for the drug Vanrafia.