IBM’s profit warning shows tech valuations are all in the timing

Financial Times Europe16 Jul 2026

IBM’s worst day in 20 years was a pretty reas on able one for the mar ket. The ITgiant’s stock fell 25 per cent on Tues day, but the S&P 500 closed slightly up.Whatever ails Big Blue doesn’t seem to be rip pling across the fin an cial world.Which is strange, because IBM’s profit warn ing has implic a tions for other com pan -ies too.

Chief exec ut ive Arvind Krishna warned that demand for IBM’s main frame productswould shrink faster than pre vi ously expec ted because of a “capex repri or it isa tion”.In plain Eng lish, cus tom ers are delay ing pur chases of big-box com puters andrelated ser vices so they can bring for ward pur chases of serv ers, stor age andmemory, where prices are rising. In plainer Eng lish: IT budgets may be ample, butthey are finite.

If one takes IBM at its word, the longterm pro gnosis for its products has notchanged. But the fact that investors sliced a quarter off its mar ket value offers a les -son about tim ing, and one that also applies to pro viders of AI ser vices them selves. Arule of fin ance is that money due tomor row is worth less than the same moneyarriv ing today.

Ima gine a com pany with a cost of cap ital of 10 per cent: that’s the rate at whichfuture cash flows must be dis coun ted to give their present value. If a cer tain level ofrev enue arrives two years later than expec ted, its value today falls by a fifth. Mod -est changes to the plan can thus cause big ger ruc tions in equity valu ations.

There is a case for believ ing the expan sion of AI rev enue will hap pen more slowlythan the hyper scalers have baked in. Cli ents often struggle to cal cu late the valuethat an AI project will cre ate. It doesn’t help that the bene fit of AI invest ment madeso far isn’t really show ing up yet. Eco nom ists at Apollo showed that profi t ab il ity forcom pan ies other than the biggest tech giants has barely risen in a dec ade.Even where AI has real bene fits, cli ents may struggle to jus tify push ing the but tonas soon as sup pli ers would like. Jet tis on ing staff whose jobs have been auto matedcan take time. Since budgets aren’t lim it less, that could prompt more so-calledrepri or it isa tion.

Sil icon Val ley is start ing to pay more heed to the poten tial caesura between sup plyand demand. Bloomberg has repor ted that Meta Plat forms may rent out sur pluscom put ing power, as Google does, squeez ing cash today from assets that might oth -er wise not pro duce until tomor row. Elon Musk’s xAI just star ted doing the same.

That’s good for their investors, but sug gests anxi ety is mount ing. Time really ismoney. This earn ings sea son, heed not what com pan ies plan to do with AI, but