What Happened?

A number of stocks jumped in the morning session after IBM issued a revenue warning that suggested enterprise IT budgets are aggressively shifting toward server and memory purchases.

Dell Technologies (NYSE: DELL) and Hewlett Packard Enterprise (NYSE: HPE) traded higher in early action, rising alongside positive analyst commentary regarding compute-exposed names. The upward momentum coincided with a sharp drop for IBM, highlighting a stark divergence between hardware equipment vendors and traditional software or consulting providers. IBM pre-announced adjusted earnings of $2.93 per share on $17.2 billion in revenue, missing Wall Street estimates. In a letter to investors, CEO Arvind Krishna explained that the shortfall occurred because clients suddenly reprioritized their spending in late June. 

Specifically, Krishna noted that customers shifted their capital expenditure toward servers, storage, and memory to secure supply-constrained infrastructure ahead of expected price increases, causing numerous large software and consulting deals to stall. For hardware vendors like Dell and HPE, this development serves as a highly bullish read-through. When a massive global integrator like IBM explicitly attributes its own deal delays to customers hoarding servers and memory chips, it suggests that enterprise demand for physical infrastructure is still strong. 

Analysts at Morgan Stanley noted that this dynamic illustrates how hardware refresh cycles and AI-related compute shortages are forcing companies to accept significant price increases for physical infrastructure. If this budget dynamic extends across the broader market, it likely confirms a prolonged growth runway for equipment providers at the direct expense of software vendors. However, a key risk remains: this surge in hardware spending may partly reflect short-term panic-buying to front-run price hikes rather than sustainable, multi-year demand. Confirming the durability of this hardware supercycle will require Dell and HPE to show sustained backlog growth in their upcoming quarterly reports, proving the spending shift is structural rather than a one-time inventory grab.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Hardware & Infrastructure company Everpure (NYSE: P) jumped 3.8%. Is now the time to buy Everpure? Access our full analysis report here, it’s free.
• Hardware & Infrastructure company NetApp (NASDAQ: NTAP) jumped 6.4%. Is now the time to buy NetApp? Access our full analysis report here, it’s free.

Zooming In On NetApp (NTAP)

NetApp’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 8 days ago when the stock gained 5.4% on the news that the ISM Services PMI Report showed the business services sector continued to expand in June. 

The Institute for Supply Management (ISM) reported that its Services PMI® registered 54 percent. While this is a slight decrease of 0.5 percentage point from May's reading of 54.5 percent, it marks the 24th consecutive month of growth for the sector. A PMI reading above 50 percent indicates that the services sector economy is generally expanding. The sustained period of expansion suggests a resilient economic backdrop for service-oriented companies, signaling healthy business activity and demand.

NetApp is up 64% since the beginning of the year, and at $174.59 per share, it is trading close to its 52-week high of $181.08 from June 2026. Investors who bought $1,000 worth of NetApp’s shares 5 years ago would now be looking at an investment worth $2,187.

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