IBM's shares plunged 23% following a profit warning, as the company faced challenges with customers shifting their spending priorities towards Artificial Intelligence. This significant drop follows a tumultuous period for IBM, including an 8% fall on Thursday and a more than 20% decline in February, marking its largest monthly decrease in decades. The February slump was catalyzed by AI developer Anthropic's announcement of a tool aimed at modernizing COBOL, a programming language prevalent in systems running on IBM mainframes. This development fueled investor anxiety regarding AI's potential to disrupt IBM's long-standing business models, particularly in its mainframe and consulting segments.
Despite these market concerns, IBM has actively pushed back against the narrative that AI will negatively impact its business. CEO Arvind Krishna stated that AI continues to be a "tailwind" for the company as clients scale their use cases. The company has also been on an acquisition spree, including Red Hat in 2019, HashiCorp last year, and Confluent more recently, to position itself as a hybrid cloud software provider. These acquisitions are intended to bolster revenue, yet Wall Street views the company's full-year guidance of constant currency revenue growth above 5% as cautious, especially considering the expected contributions from recent acquisitions.
The decline in IBM's stock, which saw a single-day crash of 13.15% on February 23, 2026, wiping out over $31 billion in market value, underscores broader investor fears about AI's disruptive potential across the tech services industry. IBM, long known for its mainframe computers and substantial revenue from maintaining legacy systems, faces questions about the long-term defensibility of these operations amid rapid AI advancements. The anticipation that AI tools could reduce the cost and effort of modernizing COBOL-based systems threatens IBM's long-term services revenue streams. In its fourth quarter ending December 2025, IBM reported revenue of $19.7 billion, up 12% year-on-year, and full-year 2025 revenue of $67.5 billion, up 8%. Software revenue increased 14%, consulting revenue 3%, and infrastructure revenue 21%.
