IBM shares crashed 25% to their lowest level since 1968 on Tuesday after the technology company issued a devastating earnings warning for the second quarter. The sell-off dragged down software stocks across the broader market.

CEO Arvind Krishna blamed the collapse on a sudden shift in customer spending. Instead of buying software, enterprises dumped capex into hardware—specifically servers, memory chips, and storage equipment—as they rushed to lock in prices before expected increases later this year.

The numbers tell the story. IBM reported preliminary Q2 revenue of $17.2 billion, up just 1% and well below the $17.86 billion analysts expected. Operating EPS came in at $2.93, below the $3.01 consensus. The revenue miss signals serious headwinds in IBM’s software and infrastructure business.

What Wall Street Is Saying

HSBC downgraded IBM to Reduce from Hold, slashing the price target to $191. Other analysts quickly followed suit, with the selloff accelerating into the afternoon close.

The full earnings report arrives on July 22, giving investors a long wait to understand the full scope of the miss. That’s when Krishna will have to explain in detail why customer behavior shifted so sharply and whether Q3 and Q4 can recover.

Broader Market Ripple Effects

The crash wasn’t isolated to IBM. Software stocks tumbled across the board on concerns that IBM’s experience might signal broader enterprise spending weakness. If companies are cutting software budgets to hoard chips, that’s bad news for the entire software sector.

IBM’s 25% plunge marks the worst single-day performance in nearly six decades. Investors got a stark reminder that even megacap tech names can crater when guidance misses badly.

The full earnings report on July 22 will determine whether this was a one-quarter anomaly or the start of a longer slowdown in enterprise software spending.