After IBM's warning, all eyes on AI challenge

Shares in IBM were down 0.3% on Wednesday ahead of Q2 results due after market close after the company last week pre-reported results and warned it has fallen behind in AI trends.

The stock tumbled 25% on July 14, after the company said it now expects Q2 adjusted EPS of $2.93 vs Street estimates of $3.02 and revenue of $17.2 billion vs analysts' estimates of $17.86 billion, according to data compiled by LSEG at the time.

IBM, which provides technology products and services, said it had "faltered" in keeping pace with a shift in corporate spending from software to data-center infrastructure, in the clearest sign yet of AI's growing toll on the sector.

In the year-ago quarter, IBM reported EPS of $2.80 on revenue of $16.98 billion, per LSEG.

Shares last traded at $209.84 vs a median PT of $256.22, down from $287.09 a month ago, according to LSEG, which shows 27 analyst ratings: 7 "strong buy," 7 "buy," 11 "hold," and 2 "sell."

YTD the stock is down about 29% vs about a 9% gain for the Dow industrials and a 17% advance for the S&P 500 technology index.

Shares in the broader software sector have suffered due to investor anxiety about AI's impact on demand, with the S&P 500 Software & Services index down about 20% YTD.

IBM options imply a 6.3% swing for the shares, in either direction, by Friday; that is in line with the stock's eight-quarter post-earnings one-day average move of 6.5%, according to Trade Alert.