• 2 min read
IBM tumbles as Q2 revenue misses despite AI boom
IBM shares sank after preliminary Q2 revenue landed at about $17 billion, well below expectations, even as cumulative AI bookings topped $12 billion.
Image: TNW
IBM shares dropped sharply after the company said its preliminary second-quarter revenue would come in at roughly $17 billion — up 1 percent year over year, but well below the $18 billion analysts had expected. The stock fell as much as 17 percent in premarket trading, wiping out weeks of gains after a rally that saw IBM climb 30 percent in May alone.
CEO Arvind Krishna called the results disappointing in a letter to investors. The weakness was spread across the business. Software revenue rose 5 percent, with Red Hat up 11 percent, but both missed forecasts. Consulting was essentially flat, while infrastructure revenue fell 7 percent as customers cut back on mainframe and storage purchases.
Krishna said the shortfall came down partly to execution problems, including large deals that did not close in time. He also said some customers shifted capital spending toward servers, storage, and memory in the final weeks of June ahead of expected tariff-related price increases.
Margins also moved the wrong way. Adjusted earnings per share came in at nearly $3, below the roughly $3 consensus. Gross profit margin fell to just under 58 percent, down about one percentage point from a year earlier, while pre-tax margin slipped to just over 14 percent. That mix of weaker revenue and tighter margins appears to have driven the sell-off.
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The standout was AI. IBM said cumulative AI bookings have now passed $12 billion, pointing to continued enterprise demand for AI consulting and infrastructure. The company has been pushing deeper into the market through partnerships, including a recent deal with OpenAI focused on enterprise cybersecurity.
Still, the preliminary figures suggest AI growth is not yet enough to counter weakness in IBM’s older businesses. The decline in infrastructure, flat consulting performance, and the execution issues Krishna cited all add pressure as IBM tries to shift its revenue base. The company is expected to report full quarterly results later this month.
Enterprise Editor
Marcus follows the money. He covers enterprise software, cloud architecture, and the tectonic shifts in Big Tech strategy. He translates dense earnings calls and complex M&A activity into actionable insights about where the industry is actually heading. If a tech giant makes a silent pivot, Marcus is usually the first to notice.
via TNW
