IBM Stock Rebounds After Worst Single-Day Decline Since Going Public

IBM stock rose 0.7% in premarket trading on Wednesday after suffering its steepest single-day decline since going public nearly 60 years ago, losing a quarter of its market value on Tuesday.

The company's preliminary earnings release cited a faster-than-expected shift in client spending from software to AI servers, with mainframe business weakness largely responsible for the decline. Morningstar analysts believe this is a short-term setback and that clients are more likely to delay rather than cancel their mainframe upgrades.

IBM expects second-quarter revenue to rise 1% to $17.2 billion, but the bottom-line figures were concerning, with a gross profit margin expected to drop by 100 basis points to 57.7%. The company warned that clients are shifting tech spending to secure supply-constrained infrastructure ahead of expected price increases.

Several software stocks, including Salesforce and ServiceNow, fell on Tuesday after IBM's warning. Morningstar maintained its $260 price target for IBM, citing the company's long-term AI opportunities in hybrid cloud and data software.