CNBC’s Jim Cramer says IBM’s disappointing second-quarter preannouncement reflects a broader shift underway in enterprise technology spending, noting that the company is increasingly finding itself on the wrong side of the artificial intelligence investment boom.
IBM shares plunged about 25% after the company unexpectedly warned that second-quarter revenue, earnings, and software growth would fall short of Wall Street expectations ahead of its scheduled earnings release next week.
The sharp selloff erased billions of dollars in market value and marked one of IBM’s steepest single-day declines in years, underscoring investor concerns that the company is struggling to capture the wave of AI spending reshaping the technology industry.
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Speaking on CNBC’s Mad Money, Cramer said the disappointing results signal more than a company-specific execution issue.
“That’s the new reality, and I have no idea when it will change, which is why I can’t recommend IBM, not even after today’s severe decline,” he said.
IBM Chief Executive Arvind Krishna acknowledged the company “faltered” during the quarter after several large customer contracts failed to close as expected.
While IBM characterized the weakness as delayed deal closures rather than lost business, Cramer argued the results highlight how corporate technology budgets are being fundamentally reallocated in the AI era.
According to Cramer, enterprise customers are increasingly concentrating spending in three critical areas:
Artificial intelligence infrastructure and AI model usage (“tokens”)
Cybersecurity
Hardware required to support AI deployment
As organizations race to deploy generative AI across their operations, those priorities are absorbing a growing share of IT budgets, leaving traditional software upgrades, consulting projects and other digital transformation initiatives facing delays or outright cancellation.
“Unfortunately for IBM, they have too many products and services that fall into the ‘other types of spending’ categories, even if they also have a decent overall AI narrative,” Cramer said.
Across the technology industry, companies with direct exposure to AI infrastructure—including Nvidia, Broadcom, TSMC, ASML and hyperscale cloud providers—continue to post strong growth, while vendors focused on legacy enterprise software or traditional IT services face slower customer spending.
IBM has invested heavily in positioning itself as an AI company through its watsonx platform and its acquisition strategy, but investors have questioned whether those initiatives are translating into meaningful revenue growth compared with rivals that benefit directly from surging AI infrastructure investment.
Cramer acknowledged that Krishna deserves credit for taking responsibility for the disappointing quarter and noted that IBM still possesses several attractive long-term businesses. The stock’s decline has pushed its dividend yield above 3%, making it more attractive from an income perspective.
However, he argued that those positives are outweighed by concerns that enterprise spending patterns are undergoing a structural rather than temporary change.
“We’re at the point in the year where IT managers are putting together their budgets for 2027, and you have to assume that these three priorities I just identified will continue to dominate, which means anything outside of them has a real problem,” he said.
Corporate IT budgeting typically influences technology spending over the following year, making that observation particularly significant. If AI infrastructure, cybersecurity and computing hardware remain the dominant priorities, companies like IBM that generate substantial revenue from consulting, enterprise software and hybrid cloud services could continue facing pressure.
The results also reinforce growing investor scrutiny of enterprise software companies’ AI strategies. While nearly every major technology vendor now markets AI products, investors are distinguishing between firms directly benefiting from AI capital spending and those whose AI offerings have yet to materially offset weakness in their traditional businesses.
Cramer said he hopes IBM’s delayed contracts ultimately close rather than disappear altogether, but he cautioned investors against assuming that outcome.
“I hope that IBM truly is just seeing its deals get delayed, and not canceled,” he said. “But I can’t tell you to buy a stock because I hope something is true.”
IBM’s results are likely to be watched closely when the company reports full quarterly earnings next week, as investors look for evidence that customer demand is merely shifting into future quarters rather than reflecting a deeper erosion of spending priorities. The report will also provide another gauge of how the AI investment cycle is reshaping enterprise technology spending, with companies being forced to choose between funding AI initiatives and maintaining traditional IT projects.