“IBM’s biggest challenge is not relevance. It is execution,” one analyst wrote on LinkedIn this week in response to Tuesday’s news that shares in the tech giant were down 25%. IBM’s biggest-ever intraday share drop comes after a preliminary Q2 revenue report that fell short of Wall Street predictions.
In a profit warning issued ahead of the market drop, IBM cautioned that sales fell short of expectations—with Q2 revenue of $17.2 billion, compared to the anticipated $17.86 billion—as customer spending trended away from software and toward AI hardware and memory chips.
In a memo to investors viewed by The Wall Street Journal, CEO Arvind Krishna said the company experienced lower-than-expected demand for its enterprise mainframe, z17, and ongoing supply chain issues related to hardware like chips.
“What played out was worse than our expectations,” Krishna said in the letter. “These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected.”
Expert: Markets will ‘punish legacy players’ losing AI race
WSJ quoted Emarketer analyst Jacob Bourne as predicting that markets will “punish legacy players showing signs of losing ground in the AI race.” The shift toward enterprise AI from SaaS, he says, won’t necessarily spell extinction for legacy giants like IBM, but rather highlights the importance of staying adaptive to shifting tech spending trends.
“AI momentum alone isn’t enough,” wrote one commenter on LinkedIn. “Investors still want strong revenue growth across the entire business.”
The volatile environment facing legacy software giants like IBM comes amid months of sweeping tech-sector layoffs, as organizations invest heavily in AI infrastructure.
Even as AI investment disrupts customer spending, it’s also shaping internal people strategy. IBM has been somewhat of an outlier in how its people strategy meets the moment; where many other tech companies are slashing jobs and moving away from entry-level hiring, CHRO Nickle LaMoreaux says the company is tripling entry-level hiring and using AI-driven efficiencies to drive innovation, not reduce headcount.
While adapting to the changing external market, Moreaux, one of HR Executive‘s Top 100 HR Tech Influencers, says HR today also needs to ensure people strategies remain flexible.
“We have to get comfortable constantly reengineering jobs to the value,” she says, “and that value is always going to be shifting.”
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