IBM reported adjusted earnings of $2.93 per share on revenue of $17.2 billion, which were below the anticipated earnings of $3.01 per share and revenue of $17.86 billion, as per FactSet.
CEO Arvind Krishna attributed the disappointing results to a shift in client spending from software to hardware, particularly in memory chips, as companies aimed to secure supply-constrained infrastructure ahead of expected price increases. Krishna noted that while some supply chain impacts were anticipated, the extent of the capital expenditure (capex) reprioritization was unexpected.
He acknowledged that the company did not adapt quickly enough to these changes, resulting in several large deals not closing as planned, which contributed significantly to the earnings shortfall. This news has led to a sharp decline in IBM's stock price in premarket trading, reflecting investor concerns about the company's ability to navigate current market conditions