Indian IT stocks declined as IBM reported a disappointing preliminary second-quarter update that triggered its biggest single-day drop since 1968. The sell-off added to the concerns of enterprise technology spending, particularly as Indian IT companies are about to deliver quarterly earnings updates.
The Nifty IT index fell around 2% while the Nifty 50 and Sensex edged higher by nearly 0.5%. The sentiment across the IT services sector was low as Infosys, TCS, Wipro, Persistent Systems, Coforge, LTIMindtree, Mphasis, Tech Mahindra, and L&T Technology Services were all in the red.
IBM announced second-quarter revenue of $17.2 billion, slightly below Wall Street's forecast of around $17.9 billion. Its adjusted earnings per share stood at $2.93, while the estimated consensus was at around $3.01-$3.02 per share.
The news of the underperformance in earnings caused a big reaction in the United States. IBM fell 25.21% to close at $217.07, wiping nearly $70 billion in marketcap.
During the quarter, software revenue increased 5% year-on-year, consulting revenue remained flat, while infrastructure revenue declined 7%.
IBM Chairman and Chief Executive Officer Arvind Krishna acknowledged the disappointing performance, saying the company "did not adapt and move quickly enough."
IBM research shows that enterprise customers are moving funds into AI technologies like servers, storage, and memory chips rather than spending on software. Weakness in the software and infrastructure companies and failure to close big enterprise deals, also impacted the quarterly results.
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Shares of Tata Consultancy Services (TCS) were trading at Rs. 2,190.10, down 0.48% for the day. The stock opened at Rs. 2,174.10, climbed to an intraday high of Rs. 2,202.90, and touched a low of Rs. 2,145.40 as investors remained cautious following weak global technology cues.
Wipro Ltd. shares were trading at Rs. 176.15, down 0.56%. The stock opened at Rs. 175.12, hit an intraday high of Rs. 176.60, and slipped to a low of Rs. 174.65, mirroring the broader weakness in IT stocks.
Infosys Ltd. shares traded at Rs. 1,080.20, down 1.16%. The stock opened at Rs. 1,079, touched an intraday high of Rs. 1,088.10, and fell to a low of Rs. 1,074 amid selling pressure across the technology sector.
IBM’s results have revived concerns about demand visibility for IT services firms. Investors will closely track Indian IT management commentary on dealing with AI conversion, discretionary spending, consulting demand, margin pressure, and large deals closing.