IBM (IBM, Financials) shares sank about 6% in after-hours trading on Wednesday after the firm announced second-quarter profits that were better than Wall Street expected but not as good as expected for software performance.
The adjusted earnings per share were $2.80, which was more than the $2.64 consensus. The sales also went up 8% from last year to $16.98 billion, which was more than the $16.59 billion estimate. Net income went up to $2.19 billion, or $2.31 per share, from $1.83 billion, or $1.96 per share, in the same quarter previous year.
Software sales went up 10% to $7.39 billion, although they fell short of the $7.43 billion that was expected. The unit’s gross margin was 83.9%, which is a little below than the 84% projection. Arvind Krishna, the CEO, said that clients were spending more on hardware and that choices were being delayed because of geopolitical concerns and tight U.S. federal budgets.
Both infrastructure revenue, which rose 14% to $4.14 billion, and consulting revenue, which rose nearly 3% to $5.31 billion, were more than expected. IBM stuck to its prediction of more than $13.5 billion in free cash flow in 2025 and at least 5% revenue growth at constant currency, even though several projects were delayed.
IBM’s generative AI business grew from $6 billion in April to $7.5 billion. Krishna stated that when the rules get better, the company hopes to grow even more through mergers and acquisitions.
This article first appeared on GuruFocus.