In a disappointing performance, IBM shares have announced to be plunged 20% in pre-market trading after the technology giant released preliminary second-quarter results that missed Wall Street expectations.
The performance has sharply declined the stock to its lowest level in nearly two months, igniting concerns among investors over slowing growth.
As per IBM, nearly $17.2 billion in revenue was generated, up 1% year-over-year but below analysts' project of $17.86 billion.
Adjusted earnings every share came in at $2.93, also missing the expected $3.01.
CEO admits company 'faltered'
IBM CEO Arvidn Krisna addressed the company’s weak performance, stating it failed to adapt quickly enough during the quarter.
Krishna stated, "These conditions require our teams to execute perfectly, and this quarter we faltered."
Some significant customer deals failed to close on schedule, contributing significantly to the earnings shortfall, he added.
Krishna emphasized that the challenges were "realities, not excuses."
Client spending shift hurt business
As per the CEO, several customers redirected their capital spending toward servers, storage systems and memory hardware to get supplies ahead of expected price spikes.
The transition minimised demand for IBM’s Z mainframe systems and related transaction processing software. Infrastructure revenue saw a sharp decline of 7%, while software revenue increased 5% and consulting remained largely flat.
Moreover, Krishna cited some security concerns that delayed buying decisions among enterprise customers during the quarter.
Analysts split on IBM's outlook
Following the update, some analysts sparked mixed reaction, as Morgan Stanley maintained its Equalweight rating while raising its price target, whereas HSBC downgraded the stock to Reduce, arguing investors could achieve better returns through a mix of companies including SAP, Accenture, HP and IonQ.
