CNBC’s Jim Cramer said Tuesday. IBM We ended up on the wrong side of a major shift in corporate technology spending.
“This is the new reality, and I have no idea when that will change. That’s why I can’t recommend IBM, even after today’s deep decline,” the “Mad Money” host said.
IBM shares fell about 25% after the company pre-announced disappointing second-quarter results ahead of its scheduled earnings release next week. Sales, profits and software revenue growth all fell short of Wall Street expectations, and CEO Arvind Krishna acknowledged that the company was “sluggish” after several large customer deals failed to close.
Kramer said the shortfall is one of the clearest signs yet that companies are realigning their information technology budgets as spending on artificial intelligence accelerates.
He said companies are increasingly prioritizing three areas of IT spending: cybersecurity, hardware, and AI “tokens,” or consumption-based costs associated with using AI models. Other technology projects are increasingly being sidelined, he argued.
“Unfortunately for IBM, too many products and services fall into the ‘other spend’ category, even though they have a good overall AI story,” he said.
Mr. Kramer praised Mr. Krishna for taking responsibility for the disappointing quarter and said IBM still has an attractive long-term business, with the stock currently yielding more than 3%.
But he said these positive news alone aren’t enough to negate concerns that IBM will continue to be hurt by changes in corporate technology budgets.
“I’m too concerned about these trends to say it’s safe to buy IBM right now,” Cramer said. “As we are at the point this year where IT managers are putting together their 2027 budgets, we have to assume that these three priorities that I just identified will continue to be our priorities, which means there are big problems outside of these priorities.”
“I hope IBM really just sees the contract postponed and not cancelled,” he added. “But you can’t say buy a stock because you want something to be true.”
