On July 14, IBM did something a 115-year-old company almost never does: it told investors a quarter had gone wrong before it had finished counting it. In the final weeks of June, chief executive Arvind Krishna wrote, clients had redirected capital budgets toward servers, storage and memory to lock in supply-constrained hardware ahead of expected price increases, and numerous large deals had failed to close on schedule . The stock fell about 25% that day, a steeper single session than any in records running back to 1968 per CNBC . Roughly $70 billion of market value went with it.
IBM runs four reporting segments: Software, which was $29.96 billion of 2025 revenue, Consulting at $21.06 billion, Infrastructure at $15.72 billion, and a small captive Financing arm at $737 million . Inside Software sits a block of revenue that behaves nothing like software — enterprise license agreements attached to the mainframe, treated by clients as capital expenditure and booked by IBM in lumps. When the June capex scramble hit, that block did not get deferred by a month in some abstract sense. It simply did not sign. Transaction Processing revenue fell 9% in the second quarter, stripping out currency moves, while Data grew 18% on the same basis and Red Hat accelerated to 11% .
Markets read the episode as something larger: that the AI infrastructure buildout was permanently crowding enterprise software out of corporate budgets . Wednesday's third-quarter report, released after the close on October 21, goes a long way toward settling that specific question.
Two-thirds of the slipped deals closed, and transaction processing went from minus nine to plus ten
Third-quarter revenue of $17.1 billion grew 5%, or 6% before currency effects, with Software up 9% and Infrastructure up 5% on that...