American Depositary Receipts (ADRs) of Indian IT majors Infosys and Wipro fell sharply in US trading after IBM issued a weaker-than-expected revenue outlook, triggering a broad sell-off in global technology and software stocks.
Infosys ADR tumbled 7.91% to $11.5, while Wipro ADR declined 4.21% to $1.90.
The decline followed a steep fall in IBM shares, which plunged as much as 23% in pre-market trading after the company projected second-quarter revenue and earnings below Wall Street expectations.
The weakness spread across the software sector, with Oracle falling 2.3%, ServiceNow dropping 6.8%, Accenture losing 8.5%, Adobe declining 4.8% and Cognizant shedding 7%.
IBM forecast second-quarter revenue of $17.2 billion, representing a 1% year-on-year increase, while adjusted earnings per share were projected at $2.93. Analysts had expected earnings of $3.01 per share.
The outlook has raised concerns over enterprise technology spending, particularly for software and consulting companies, and could weigh on sentiment for the broader IT sector.
ALSO READ: IBM Shares Plummet 23% As IT Major's Revenue, Earnings Forecast Miss Street Estimates
IBM CEO Arvind Krishna attributed the shortfall to a shift in customer spending priorities.
"In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases," Krishna said in a letter to investors.
"While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization," he added.
According to the company, customers diverted capital expenditure towards hardware infrastructure, including servers, storage and memory, at the expense of software and consulting budgets.
The development is significant for Indian IT companies, as IBM's results are often viewed as an early indicator of global enterprise technology spending trends. With IBM, Infosys and Wipro all trading on US exchanges, the sharp reaction in IBM shares spilled over to the ADRs of the Indian IT majors.
The warning comes despite IBM's continued investments in emerging technologies. The company recently announced plans to invest more than $10 billion in quantum computing over the next five years and has partnered with OpenAI to develop AI-powered application security services for enterprise clients through its consulting platform and Red Hat ecosystem.
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