IBM Stock's Historic Selloff: Buy the Dip Ahead of Q2 Earnings, or Is It Too Risky?

IBM stock plunged 25% in a single day after issuing a preliminary Q2 earnings warning, with revenue expected at ~$17.2B versus $17.85B consensus and adjusted EPS of ~$2.93 versus $3.02 expected. The shortfall was driven by weaker Software and Infrastructure segments, a ~7% year-over-year infrastructure revenue decline, and enterprise customers reallocating budgets toward AI infrastructure (servers, networking, storage) rather than traditional software licenses and mainframe upgrades.

Why it matters: Despite the selloff, IBM's long-term AI strategy via Watsonx and Red Hat remains intact, and the stock's forward P/E compressed to 17x from multi-year highs, offering a discount to the S&P 500's 23x average, though the official Q2 report on July 22 will be critical for confirming whether delayed deals are timing issues or weakening demand.