Oppenheimer has downgraded IBM from "Outperform" to "Perform" and removed its previous $350 price target after the company released disappointing preliminary second-quarter results.

This downgrade follows the stock's largest single-day percentage decline since at least 1968, with shares plunging 26% intraday on Tuesday before closing down 25%.

Preliminary data from IBM showed second-quarter revenue of $17.2 billion, a 1% year-over-year increase that fell significantly short of analyst expectations of approximately $17.9 billion.

Adjusted earnings per share were $2.93, also missing the consensus estimate of $3.01.

All business segments faced pressure: software revenue grew 5%, well below Oppenheimer's 12% estimate; infrastructure revenue declined 7%, exceeding the expected 5% drop; and consulting revenue was essentially flat.

In a letter to investors, IBM CEO Arvind Krishna acknowledged "execution shortfalls," attributing the performance gap to several factors: a sharp late-June shift in client capital expenditure towards hardware purchases like servers, storage, and memory to avoid cost pressures from supply constraints and anticipated price hikes; weak performance in mainframe-related transaction processing software; and the failure to close several significant deals by the quarter's end.

Oppenheimer analyst Param Singh noted in a report that while businesses like Red Hat, HashiCorp, and Confluent showed promise, they were insufficient to offset the overall weakness.

Singh stated that "the bull thesis will take longer to play out," adding that achieving double-digit software growth in 2026 and 2027 presents a significant challenge for IBM.