International Business Machines Corporation (IBM) saw its stock price drop by 20.6% over the past three months, compared to a 12.8% increase in the industry. This decline is attributed to AI firm Anthropic’s announcement that its Claude Code tool can modernize legacy COBOL systems, which heavily underpin IBM’s mainframe operations. This development may reduce enterprises’ reliance on IBM and create competition in a sector that has been historically lucrative for the company.
IBM is also grappling with increased competition from Amazon Web Services and Microsoft Azure, which is squeezing profit margins and creating pricing pressures. In response, IBM has initiated significant job cuts as part of a strategy to reduce operating costs. The layoffs have particularly affected employees in marketing and communications, as the company shifts focus towards higher-margin AI and software sectors.
Despite these challenges, IBM’s long-term growth prospects remain bolstered by demand for hybrid cloud solutions and advancements in AI technologies. Earnings estimates for 2026 have increased by 1.1% to $12.37, indicating a slight bullish sentiment around the stock.
