IBM’s management also reiterated its 2026 guidance, including revenue growth of over 5% in constant currency and free cash flow to increase by $1 billion.
IBM has transformed itself to a high-growth software company with the acquisitions of Red Hat, HashiCorp and Confluent. The stock had seen its steepest sell-off in decades this February after Anthropic unveiled tools that could help modernize a dated programming language that runs on IBM mainframes.
According to analysts at Jefferies, investors were hoping for a better show from the Software business and that Wall Street would ask questions as to whether customers are delaying purchases with IBM while they test out other AI firms.IBM CFO Jim Kavanaugh said that the company expects growth of two percentage points for its software unit that will be tied to generative AI work this year.
Sales at the infrastructure business grew by 15% from last year to $3.33 billion, ahead of expectations, while the consulting revenue grew by 4%, the highest since 2023 to $5.27 billion.
Shares of IBM are down 7%, dragging the Dow futures lower by 200 points as well. The stock is an important component of the Dow Jones.
(With Inputs From Agencies)
