Oppenheimer on Wednesday willIBMThe rating was downgraded and the $350 target price was withdrawn. Analyst Param Singh judged that it would "take longer" to realize the bullish logic, and expected the stock price to remain ranged in the short term.
On July 15th, Wall Street investment bank Oppenheimer pointed out in a research report that,Without large-scale mergers and acquisitions or substantial coverage of large-scale orders, IBM will "face great challenges" to achieve double-digit growth in its software business from 2026 to 2027.
The agency also noted that,The trend of IT spending tilting towards hardware is expected to benefit server and storage equipment manufacturers, but similar IT budget compression may pose short-term risks to infrastructure software vendors, which puts pressure on many IBM's business lines.
Wall Street News mentioned that on July 14th, IBM said in a statement that its preliminary revenue in the second quarter was $17.2 billion, lower than analysts' average expectation of $17.9 billion. Among them, the sales of infrastructure business dropped particularly significantly, decreasing by 7%.
The company disclosed that in late June, the direction of customers' capital expenditure changed sharply, and some budgets suddenly shifted from the software and host fields to hardware resources with tight supply such as servers, storage and memory, resulting in many large transactions that failed to land on schedule.
IBM's share price plunged 25% in a single day on Tuesday due to the warning of second-quarter results, evaporating more than $700 billion in market value, the biggest one-day drop since at least 1968. It fell another 2.71% on Wednesday, dropping its market value to $19.85 billion.
Krishna, IBM's chief executive, rarely admitted that there were executive failures. In his performance note, he said:
Teams are not quick enough to adapt and act, resulting in many large transactions not being completed as expected.
Software growth rate is "halved" from expectation, and third-tier businesses are under full pressure
IBM's preliminary total revenue in the second quarter is 17.2 billion US dollars, up only 1% year-on-year, lower than the market expectation of 17.9 billion US dollars.
Software business revenue increased 5% year-over-year, missing Oppenheimer's 12% estimateManagement attributed this to weak demand for transaction processing software, poor performance of the mainframe-related software portfolio, and delays in delivery of some large orders until after the end of the quarter.
Red Hat(RedHat)Accelerating 11% sequential growth, HashiCorp and Confluent performed strongly, but not enough to offset the drag on their core businesses.
InfrastructureRevenue fell 7% year-over-year, worse than the expected 5% drop; Advisory revenue remained flat year over year, slightly below the expected 1% increase.EPS of $2.93 under non-standard accounting, miss the market expectation.
However, IBM has maintained its full-year 2026 guidance, expecting revenue growth of more than 5% at constant exchange rates and free cash flow to increase by about $1 billion year-on-year.Year-to-date, net cash flow from operating activities was $7.8 billion and free cash flow was $4.8 billion.
Pressure is widespread in the technology software sector
IBM's plunge is not an isolated event, and traditional enterprise software giants are generally under pressure during the year.
OracleHas decreased by 33% during the year,MicrosoftDown 20%,AccentureThe decline is as high as 50%.
Oppenheimer's rating downgrade further strengthens the market's expectation of the reconstruction of the valuation logic of the traditional software sector in the AI era.
Enterprise capital expenditure is accelerating to concentrate on AI infrastructure hardware, and traditional enterprise software and consulting businesses are thus under systemic pressure on the demand side.
For IBM, how to find the growth anchor again in this wave of transformation is still the core issue faced by management.
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