ServiceNow Inc. (NYSE:NOW) shares are trading lower Tuesday in sympathy with IBM, which posted preliminary second-quarter earnings.

• ServiceNow stock is taking a hit today. Why are NOW shares down?

ServiceNow and IBM have a long history of close collaboration, having announced an expanded partnership just last week to modernize enterprise systems and unlock data for AI at scale. That deepening relationship makes ServiceNow’s stock more sensitive to shifts in sentiment around IBM’s business performance.

IBM’s Preliminary Results

IBM reported preliminary Q2 revenue of $17.2 billion, up 1% year-over-year but below the $17.86 billion consensus estimate, with CEO Arvind Krishna calling the results “disappointing” in a letter to investors. Adjusted EPS came in at $2.93, below the $3.022 estimate, while GAAP diluted EPS was $2.27, down 2% year-over-year.

According to Krishna’s letter, the shortfall was driven primarily by weaker-than-expected performance in IBM’s Z mainframe business and its associated software stack. Clients shifted capital expenditure toward servers, storage and memory purchases in the final weeks of June to secure supply-constrained infrastructure ahead of expected price increases — a dynamic that contributed to numerous large deals failing to close on IBM’s expected timelines.

ServiceNow Shares Drop

NOW Price Action: At the time of publication, ServiceNow shares are trading 7.96% lower at $102.40, according to data from Benzinga Pro.

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