IBM shares are on pace for their worst trading day in the company's 115-year history, plunging 24% in premarket trading. This follows an extraordinary warning from IBM CEO Arvind Krishna, who stated the company struggled in the past three months as customers rapidly shifted technology budgets, prioritizing AI datacenters. This shift left less for IBM's new z17 mainframe.

Krishna admitted the situation "played out worse than our expectations," attributing the struggle to not adapting quickly enough. Surging microchip prices, driven by AI datacenter demand, also impacted customer spending. IBM anticipated supply chain issues but was surprised by the magnitude of customer capital expenditure reprioritization. Additionally, Anthropic's Mythos debut distracted customers and paused several anticipated large deals.

Preliminary sales grew only 1% and earnings per share fell 2%, both below forecasts. Krishna acknowledged that IBM "faltered" in execution this quarter, while also noting rapid innovation, including the launch of Lightwell security software in response to Mythos. IBM's stock is down 2% year-to-date amid a challenging tech landscape.