IBM Stock Plunges 5.15% on Software Segment Concerns

On July 24, 2025, IBM's stock experienced a significant drop of 5.15% in pre-market trading, reflecting investor concerns over the company's recent financial performance and future prospects.

IBM released its second-quarter earnings report, revealing that while overall revenue and profit exceeded market expectations, the software business underperformed. The software segment reported revenue of $73.9 billion, a 10% year-over-year increase but slightly below the analyst consensus of $74.9 billion. The gross margin for the software division was 83.9%, also falling short of the expected 84%.

Investors have been particularly focused on IBM's software business and its potential for growth in areas such as artificial intelligence and quantum computing. The company highlighted that its generative AI business has accumulated over $75 billion in orders since mid-2023, a substantial increase from the $60 billion reported in April. However, analysts remain cautious about the software division's ability to sustain high growth rates.

During the earnings call, IBM's CEO Arvind Krishna noted that current customer spending priorities are shifting towards hardware, suggesting that investments in emerging technologies like generative AI have not yet translated into sustained growth for software services. This sentiment has contributed to the stock's decline, as investors reassess the company's growth trajectory and strategic direction.