Oppenheimer downgrades IBM to Perform, withdraws price target after 25% earnings slump
The downgrade follows a record single-day share price decline that erased approximately $68 billion in market capitalisation, highlighting concerns over execution and timing.
Oppenheimer has downgraded International Business Machines (IBM) to a "Perform" rating and withdrawn its previous price target, marking a significant shift in sentiment following the technology giant’s worst trading session on record. The move comes in the wake of a 25.2% single-day share price drop on July 14, which wiped out approximately $68 billion in market capitalisation as preliminary second-quarter 2026 results missed analyst consensus.
The sell-off was triggered by IBM reporting revenue of $17.2 billion, a 1% year-on-year increase that fell short of the LSEG consensus estimate of approximately $17.9 billion. Operating (non-GAAP) earnings per share are expected at $2.93, missing the consensus of roughly $3.01. Oppenheimer analyst Param Singh noted that the results missed consensus across every segment, including Software, which saw revenue rise 5%, Consulting, which was flat, and Infrastructure, which declined 7%.
IBM Chief Executive Arvind Krishna attributed the shortfall to clients reprioritising capital spending in the final weeks of June. According to Krishna, enterprises moved to lock in supply-constrained infrastructure ahead of expected price increases driven by AI demand, delaying broader spending until after the quarter’s close. This timing issue has drawn sharp criticism, with CNBC’s Jim Cramer advising against retail investors attempting to "buy the dip," arguing that IBM is currently on the wrong side of a major shift in enterprise tech budgets.
The downgrade represents a stark reversal for Oppenheimer, which previously held an "Outperform" rating backed by a $350 price target. That target has now been scrapped entirely. While the broader analyst group maintains a "Moderate Buy" consensus with an average price target of $293.95, the immediate focus remains on the full earnings report and conference call scheduled for July 22. Street expectations for the June 2026 quarter stand at $3.02 per share.
Despite the near-term volatility, IBM continues to push new product initiatives, including the rollout of Power Systems hardware and the expansion of its AI tool "Bob." The company has also deepened its partnership with Red Hat on Project Lightwell, a $5 billion initiative aimed at securing open-source software supply chains. However, Oppenheimer’s downgrade underscores that investors are closely scrutinising IBM’s ability to execute as capital expenditure patterns evolve in the AI era.
