IBM Stock Plummets 22% in Third Quarter With Mixed Recovery Outlook

Shares of International Business Machines (IBM) dropped 22% in the third quarter, ending around $220. This marked IBM's worst quarter since late 2018 when the stock lost 25%. The steepest decline occurred on July 14, following a disappointing second-quarter report that CEO Arvind Krishna described as 'disappointing.' This day saw the stock's worst single-day plunge, even surpassing its 24% drop during the 1987 market crash.

Historical data shows IBM has experienced 13 quarters with declines of 18% or more since 1962. In 11 of these cases, the stock recovered and was higher a year later. The median one-year gain after such drops was around 18%. Notable rebounds included a 55% rise after the 2008 financial crisis and an 18% climb in 2019 following a 25% loss in late 2018.

However, IBM's performance often mirrored broader market trends. The stock struggled in bear markets, such as in 1973 and 2001, when it continued to fall. In rising markets, IBM typically followed suit. This pattern suggests that IBM's rebounds are often tied to overall market performance rather than the company's own business improvements.

IBM's current struggles include a slowdown in software revenue growth, a critical segment for the company. After growing 14% year-over-year in the fourth quarter of 2025, growth slowed to 5% by the second quarter of 2026. Total revenue rose just 1% year-over-year in the second quarter, and management lowered its full-year forecast. The stock's valuation is not the issue, as it trades at around 17 times 2027's expected earnings, significantly lower than its June record high.