By Arsheeya Bajwa<\/p>\n
(Reuters) -IBM beat Wall Street estimates for second-quarter revenue and profit on Wednesday, but lower-than-expected sales in its mainstay software segment overshadowed a renewal in demand for the mainframe business spurred by AI upgrades.<\/p>\n
IBM’s shares fell 5% in extended trading, after a nearly 30% rise this year driven by investors betting on prioritized software spending as businesses navigated macroeconomic uncertainty and ongoing trade negotiations.<\/p>\n
“You’re seeing the stock pull back, because there’s just not a lot of room to miss,” said Dan Morgan, senior portfolio manager at Synovus Trust, which holds shares in IBM.<\/p>\n
“This would be more evidence that software is not growing at the pace that the Street was expecting.”<\/p>\n
IBM’s software segment, which has traditionally been a bright spot, reported sales of $7.39 billion, missing analysts’ average estimate of $7.41 billion, according to data compiled by LSEG.<\/p>\n
Customers funneled investment towards IBM’s latest AI-specialized mainframes, diverting revenue from transaction processing, which primarily accounts for software run on the mainframe, finance chief Jim Kavanaugh told Reuters.<\/p>\n
Transaction processing sales \u2014 which were mostly flat in the quarter \u2014 are housed in the software unit, dragging the segment’s performance.<\/p>\n
The infrastructure segment, which houses its mainframe, reported revenue of $4.14 billion, beating estimates of $3.81 billion.<\/p>\n
The Big Blue reported revenue of $16.98 billion for the June quarter, beating estimates of $16.59 billion. Adjusted earnings of $2.80 per share also beat estimates.<\/p>\n
Consulting sales grew 3%, ending five consecutive quarters of revenue declines, as businesses seek expertise on integrating AI products.<\/p>\n
However, given the “current demand environment,” IBM is “prudently cautious” on how much the consulting segment might contribute to further growth this year, Kavanaugh said during a post-earnings call.<\/p>\n
Its “AI book of business,” which combines bookings and actual sales, grew to $7.5 billion, up $1.5 billion from the previous quarter.<\/p>\n
IBM did not provide a forecast for the third quarter, after it broke tradition in April and issued a one-off quarterly outlook to give investors more clarity at a time when U.S. President Donald Trump’s global tariffs were first going into effect.<\/p>\n
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Alan Barona)<\/p>\n","protected":false},"excerpt":{"rendered":"By Arsheeya Bajwa (Reuters) -IBM beat Wall Street estimates for second-quarter revenue and profit on Wednesday, but lower-than-expected…\n","protected":false},"author":2,"featured_media":19482,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[62,276,277,49,48,16586,16587,16585,16583,16584,61],"class_list":["post-19481","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-ca","tag-canada","tag-consulting-sales","tag-jim-kavanaugh","tag-mainframe","tag-software-segment","tag-software-unit","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/19481","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=19481"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/19481\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/19482"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=19481"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=19481"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=19481"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}