IBM shares plummet 25% on weak preliminary earnings
Shares of IBM Corp. dropped 25% today after it posted preliminary second quarter earnings that missed expectations.
The company estimates that it generated $17.2 billion in revenue during the three quarters ended June 30. Analysts polled by FactSet expected $660 million more. IBM’s adjusted earnings of $2.93 per share also fell short of the consensus estimate, which forecasted $3.01 per share.
IBM Chief Executive Officer Arvind Krishna attributed the weak results to slow mainframe demand. In April, the company debuted a new flagship mainframe called the IBM z17. It features a custom chip with an eight-core central processing unit and an artificial intelligence accelerator. Krishna wrote in an investor letter that “this was the strongest start to a mainframe program in our history” but sales ultimately missed expectations.
The slowdown dented demand for IBM’s mainframe-based transaction processing software, which further weighed on its revenue. The company says that its mainframes help process 87% of all financial transactions. IBM’s mainframe business counts 44 of the world’s 50 largest banks as customers.
