IT stocks are likely to remain in focus on Wednesday after IBM reported a sharp miss on second-quarter earnings and flagged a slowdown in enterprise software spending. The commentary has raised concerns for Indian IT majors like Infosys, Wipro and Tech Mahindra ahead of their results.
US-listed IBM shares ended 25.21% lower at $217.07 on Tuesday, marking its worst single-day drop in decades. The stock reacted to preliminary Q2 2026 results that came in well below estimates.
IBM Misses Big On Revenue, EPS
IBM pre-announced Q2 revenue of $17.2 billion and adjusted earnings per share of $2.93. Both missed Wall Street expectations of $17.86 billion and $3.02 per share, respectively.
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A breakup showed software revenue grew 5% YoY, consulting was flat, while infrastructure revenue fell 7%. Non-GAAP gross margin also contracted to 59.4%.
When US markets closed, the American Depository Recipts of Indian IT stocks also came under pressure.
Infosys ADR ended 3.91% lower at $11.05 and Wipro ADR fell 3.16% to $1.840.
Shift To AI Hardware Hurts Software, Consulting Demand
IBM CEO Arvind Krishna said the miss was driven by a sharp shift in client priorities. Instead of software and mainframe systems, enterprises diverted capital budgets toward AI infrastructure like servers, storage and memory chips in anticipation of price hikes.
This reprioritisation delayed closure of several large deals and weighed on IBM's infrastructure and related software business.
IBM is widely tracked as a bellwether for global enterprise tech spending. Its commentary has fuelled worries that companies may continue prioritising AI-related hardware over discretionary technology services and consulting projects in the near term.
Notably, the company is set to release its detailed Q2 report on July 22, 2026, along with an investor webcast.
With IBM's weak print, all eyes will now be on how Indian IT firms navigate demand trends in the coming quarters.
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