Key facts
- IBM's preliminary Q2 revenue forecast is $17.2 billion, below the $17.86 billion estimate.
- Adjusted earnings per share are expected to be $2.93, missing the $3.02 estimate.
- CEO Arvind Krishna acknowledged the company's struggle to adapt to market conditions.
- Customer spending is shifting towards AI infrastructure.
- IBM shares dropped 17% in premarket trading.
IBM's preliminary second-quarter revenue forecast fell short of Wall Street expectations, with the company projecting $17.2 billion in revenue against an analyst estimate of $17.86 billion. Adjusted earnings per share are expected to be $2.93, also below the consensus of $3.02.
CEO Arvind Krishna attributed the shortfall to the company "faltering" in its adaptation to evolving market conditions, particularly the significant shift in customer spending towards AI infrastructure such as servers, storage, and memory. This pivot has reduced budgets for traditional software offerings, leading to several large deals not closing as anticipated.
The forecast sent IBM's shares down 17% in premarket trading, reflecting broader industry trends where technology spending is increasingly prioritizing AI capabilities.