Jim Cramer says IBM's 25% plunge isn't enough to make the stock a buy

On Tuesday, CNBC's Jim Cramer expressed concerns regarding IBM's recent financial struggles, highlighting a significant shift in corporate technology expenditures. Cramer noted that the tech giant is currently facing challenges due to disappointing second-quarter results, which have led to a staggering 25% drop in its stock price. The decline came after IBM preannounced results that fell short of Wall Street's expectations, with issues in revenue, earnings, and software growth. CEO Arvind Krishna admitted that the company 'faltered' as several key deals with large customers did not close as anticipated. Cramer emphasized that this shortfall signals a broader trend where companies are reevaluating their IT budgets, particularly as investments in artificial intelligence gain momentum. Cramer pointed out that organizations are now focusing their IT spending on three primary areas: cybersecurity, hardware, and costs associated with AI models, often referred to as 'tokens.' He argued that other technology projects are increasingly being deprioritized, which poses a significant risk for IBM, given its extensive range of products that do not align with these emerging priorities. While Cramer acknowledged Krishna's accountability for the disappointing performance and recognized that IBM still holds promising long-term prospects—especially with a stock yield exceeding 3%—he maintained that these factors do not alleviate concerns about the company's vulnerability to changing corporate spending habits. He stated, 'I'm too worried about these trends to say that IBM's now safe to buy,' underscoring the importance of the upcoming budget planning by IT managers for 2027. Cramer concluded by expressing hope that IBM's challenges are merely delays rather than cancellations of deals, but he refrained from recommending the stock, emphasizing that investment decisions should not be based on hope alone.