IBM shares fell 23% in pre‑market trading on Tuesday after the company warned that second‑quarter revenue would come in at $17.2bn, well below the $17.8bn analysts expected. The shortfall was driven by customers delaying software deals to pour money into AI infrastructure.

Chief executive Arvind Krishna conceded the firm “did not adapt and move quickly enough,” saying numerous large deals failed to close on schedule and that the performance was “disappointing.”

The shift toward AI servers and memory, together with heightened cyber‑security concerns, distracted buyers and cut software growth to just 5% year‑on‑year versus the 11% forecast. Infrastructure revenue is now expected to drop 7%.

Despite billions spent on acquisitions such as Red Hat, Hashi Corp and Confluent, IBM has lagged the broader market, with its stock flat this year while the S&P 500 rose 10%.