Key Takeaways
IBM (IBM) shares slumped 7% Thursday, a day after the tech giant’s chief executive warned macroeconomic conditions and government policies could cause customers to pull back spending.
In prepared remarks accompanying first-quarter results, CEO Arvind Krishna said that “in the near term, uncertainty may cause clients to pause and take a wait-and-see approach.”
Krishna explained that in conversations with clients about the current economic environment, he found some expected growth ahead, but for those “with a more direct impact from current policy, the slowdown may be more pronounced.” Krishna added that “consulting is also more susceptible to discretionary pullbacks and DOGE related initiatives,” referring to the Department of Government Efficiency (DOGE) moves to cut government spending.
IBM Q1 Results Top Estimates
The comments offset a strong quarterly report. IBM posted an adjusted profit of $1.60 per share, $0.20 more than the average of analysts surveyed by Visible Alpha. Revenue rose 0.5% year-over-year to $14.54 billion, also ahead of forecasts.
The performance was driven by software sales, which increased 7% to $6.34 billion. However, sales declined more than 2% to $5.07 billion at its consulting unit, and fell 6% to $2.89 billion at the infrastructure division.
IBM affirmed its full-year constant currency revenue forecast of at least 5% growth, with Krishna noting that the firm has “not seen a material change in client buying behavior.” It also predicted current-quarter revenue would be in the range of $16.40 billion and $16.75 billion, ahead of Visible Alpha estimates.
Even with today’s decline, shares of IBM are up about 4% year-to-date.
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