After IBM’s epic stock crash, Wall Street chatter is Big Blue should break up
Brian Sozzi· Executive Editor
Mon, July 20, 2026 at 7:24 PM GMT+5:30
2 min read
- IBM
-0.68%
After IBM’s (IBM) recent earth-shattering stock crash, some on the Street are speculating that Big Blue should orchestrate a Big Breakup
Quick insight: “There is renewed speculation about breaking-up the company,” Stifel analyst David Grossman said in a note on Monday.
Grossman conducted a sum-of-the-parts (SOTP) analysis of IBM and arrived at an enterprise value of $257 billion. The largest chunk of the valuation was hybrid cloud business Red Hat at $62.9 billion
IBM’s current market cap is about $205 billion
Grossman conceded the difficulty in valuing a business like IBM.
“We acknowledge the imprecision of our analysis; however, it suggests this may be a lower probability outcome given it does not appear to add immediate value,” Grossman said
Over the years, IBM has made several transformative acquisitions, including PwC Consulting in 2002, Cognos in 2008, and the Weather Company’s data assets in 2016. Its most significant deal came in 2019 with the $34 billion acquisition of Red Hat, a move that accelerated IBM’s push into hybrid cloud computing and artificial intelligence and remains central to its growth strategy today
The backstory: On July 14, IBM announced preliminary second quarter results with revenue of $17.2 billion, missing analyst estimates of $17.85 billion. Non-GAAP earnings are expected to be $2.93 compared to estimates of $3.02
IBM stock crashed 25% on Tuesday, its worst day since 1961. The stock lost 23% in a single session in October 1987
Bottom line: IBM CEO Arvind Krishna and his executive team will not get a pass from Wall Street analysts and investors for the disappointing second quarter
When IBM releases earnings on Wednesday, expect execs to get peppered hard on the earnings call about what happened and how long the underperformance will persist. IBM would be wise to signal that the company is at least open to exploring the value from a breakup as opposed to the value of staying the course
Run the numbers, guys, and get back to the market
Brian Sozziis Yahoo Finance’s Executive Editor, host of thePower Players with Brian Sozzipodcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X@BrianSozzi,Instagram, andLinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com
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