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CNBC's Jim Cramer said Tuesday that IBM has landed on the wrong side of a major shift in corporate technology spending.
"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," the " Mad Money " host said.
IBM shares tumbled about 25% after the company preannounced disappointing second-quarter results ahead of next week's scheduled earnings release. Revenue, earnings and software revenue growth all fell short of Wall Street expectations, prompting CEO Arvind Krishna to acknowledge the company "faltered" as several large customer deals failed to close.
Cramer said the shortfall is one of the clearest signs yet that companies are reshuffling their information technology budgets as artificial intelligence spending accelerates.
He said businesses are increasingly prioritizing three areas of IT spending: cybersecurity, hardware and AI "tokens," or the consumption-based costs associated with using AI models. Other technology projects, he argued, are increasingly being pushed aside.
"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," he said.
Cramer praised Krishna for taking responsibility for the disappointing quarter and said IBM still has attractive long-term businesses, with the stock now yielding more than 3%.
However, he said those positives are not enough to offset concerns that IBM will continue to get hurt by shifting corporate technology budgets.
"I'm too worried about these trends to say that IBM's now safe to buy," Cramer said. "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."
"I hope that IBM truly is just seeing its deals get delayed, and not canceled," he added. "But I can't tell you to buy a stock because I hope something is true."
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