TL;DRIBM shares fell sharply after preliminary Q2 revenue came in below estimates despite AI bookings topping $12 billion cumulatively.
IBM issued preliminary second-quarter results on Monday showing revenue of roughly $17 billion, up one percent year over year but well below the $18 billion that analysts had expected. Shares fell as much as 17 percent in premarket trading, erasing weeks of gains that had been fuelled by bullish analyst coverage and a stock rally of 30 percent in May alone. CEO Arvind Krishna called the results disappointing in a letter to investors.
The miss was broad. Software revenue rose five percent, with Red Hat up 11 percent, but both fell short of forecasts, while consulting was essentially flat and infrastructure revenue dropped seven percent as clients pulled back on mainframe and storage purchases. Krishna blamed execution issues including large deals that failed to close, and said some clients shifted capital spending toward servers, storage, and memory in the final weeks of June ahead of expected tariff-related price increases.
Adjusted earnings per share came in at nearly three dollars, also below the roughly three dollar consensus. Gross profit margin fell to just under 58 percent, down about one percentage point from a year earlier, while pre-tax margin slipped to just over 14 percent. The combination of weaker revenue and narrower margins drove the sharp sell-off.
