IBM Just Pre-Announced an Earnings Miss. The Reason Reveals Where AI Money Is Really Flowing.
Yahoo Finance ·
IBM ( IBM +3.87% ) didn't wait for its scheduled earnings date. On Tuesday, a week ahead of its July 22 report, the enterprise software and hardware giant released preliminary second-quarter results in a letter to investors from CEO Arvind Krishna. The numbers were disappointing. Revenue totaled $17.2 billion, up just 1% year over year and short of the company's own expectations. Investors didn't take it well. Shares fell about 24% on Tuesday, one of the worst single-day drops in the company's history, and slid further on Wednesday to a 52-week low. IBM's market capitalization now sits below $200 billion. But the most interesting part of the pre-announcement isn't the miss itself. It's Krishna's explanation of what happened in the last few weeks of June, because it says a lot about where technology budgets are actually going in the AI ( artificial intelligence ) buildout. The shortfall was a sharp reversal. In the first quarter, IBM's revenue rose 9% year over year, led by infrastructure revenue that jumped 15% as the company's new z17 mainframe rolled out. IBM expected that mainframe momentum to fade as the launch wrapped up, guiding for infrastructure revenue to decline by a low-single-digit rate for the year.
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