IBM shares tanked on Tuesday after the tech giant released preliminary second-quarter results that fell short of Wall Street’s expectations.
The company reported revenue of $17.2 billion, up just 1% and below analyst forecasts, with infrastructure revenue down 7%.
In a letter to investors on Tuesday, CEO Arvind Krishna said the company “faltered,” blaming large deals that failed to close and clients redirecting spending toward servers, storage, and memory amid expected price increases driven by the global memory shortage.
Underneath a summary of the company’s results, Krishna said IBM had underestimated the “magnitude” of clients changing spending habits, and didn’t adapt quickly enough.
You can read Krishna’s full letter below.
- Within Software, Red Hat revenue growth accelerated sequentially to 11 percent
- Recent acquisitions including both HashiCorp and Confluent delivered strong performance
- With clients prioritizing infrastructure investments, Distributed Infrastructure had its best performance in reported history, up 37 percent with strong growth in Power and Storage, and a backlog of approximately $500 million exiting the quarter
- Despite challenges this quarter, z17 remains at nearly 130 percent program-to-program, well ahead of z16 which was our strongest program on record, with clients representing 85% of installed MIPs maintaining or growing capacity
- Continued growth in Consulting signings led by strong GenAI contribution
- Productivity initiatives contributed to continued operating (non-GAAP) PTI Margin expansion in the quarter
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