IBM's (IBM, Financial) latest quarterly earnings report failed to alleviate investor concerns over the negative impacts of tariffs and federal spending cuts, leading to a significant drop in its stock price during after-hours trading. The company reported a nearly 1% year-over-year increase in revenue to $14.5 billion and an earnings per share of $1.60, both surpassing analyst expectations.
Despite IBM's resilience amid recent market volatility due to tariff measures, investors had anticipated stronger results. IBM's stock closed at $245.48 before falling over 6% in after-hours trading. Year-to-date, IBM shares have risen 12%, in contrast to the S&P 500's 8.6% decline.
IBM is transitioning from a traditional computing company to one focused on high-growth software and services. Recent acquisitions, including HashiCorp and Apptio for $4.6 billion, have expanded its business. Since mid-2023, AI consulting and software orders have exceeded $6 billion, up from $5 billion earlier in the year, with 80% from consulting and the rest from software.
Software remains IBM's fastest-growing sector, with a 7% revenue increase to $6.3 billion, while consulting revenue fell 2% to $5.1 billion, aligning with market expectations. CFO Jim Kavanaugh emphasized the company's "sustainability and resilience" in its business performance.
