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The market has a habit of connecting dots – sometimes a little too quickly. This time, one earnings warning was all it took to change the mood on Wall Street, sending shockwaves across the entire IT services and consulting space. After International Business Machines Corporation (IBM) delivered a disappointing preliminary second-quarter update, investors did not just punish the tech giant. They rushed to sell other consulting names as well, betting that the same pressures could ripple across the industry.
IBM said its preliminary second-quarter revenue and earnings would come in below Wall Street’s expectations after customers unexpectedly redirected spending in late June toward servers, storage, and memory infrastructure instead of software and consulting projects. That shift, coupled with softer infrastructure performance and industry-wide cybersecurity disruptions, was enough to spark a broad sell-off.
