Key Moments
- IBM now projects full-year revenue growth of 4% to 5%, down from a previously expected 5%.
- Infrastructure revenue declined 7% year-on-year to $3.8 billion, with data-center mainframe sales dropping 42%.
- Quarterly free cash flow totaled $2.5 billion, $300 million lower than a year earlier, while adjusted EPS was $2.93 on $17.2 billion in revenue.
Revenue Forecast Cut After Sharp Share Price Drop
Investing.com – IBM reduced its revenue growth target for the current year, cautioning that the company now expects a weaker top-line performance than it had previously communicated.
The technology group said it is currently forecasting full-year revenue to increase between 4% and 5%. Earlier this year, IBM had guided for revenue growth of 5%.
The revised outlook followed a steep selloff in IBM’s shares last week, when the stock lost around $67 billion in market value after the company pre-released its second-quarter results.
Infrastructure and Mainframe Sales Under Pressure
On Wednesday, IBM formally reported its second-quarter figures, confirming a decline in its infrastructure segment. Infrastructure revenue fell 7% year-on-year to $3.8 billion, as demand for data-center mainframes weakened sharply.
Sales of data-center mainframes in particular dropped by 42%, weighing on the overall performance of the infrastructure business.
CEO Arvind Krishna said the company is navigating a “structural shift,” while emphasizing that IBM is well positioned to support customers as they seek to capitalize on the AI era.
Quarterly Financial Highlights
IBM generated $2.5 billion in free cash flow in the quarter, a decrease of $300 million compared with the same period last year. For the first half of the year, free cash flow was $4.8 billion, unchanged from the year-earlier period.
Adjusted earnings per share for the quarter were $2.93. Quarterly revenue was $17.2 billion, representing a 1% increase from a year ago. IBM reiterated that it continues to expect improved pre-tax income margin expansion for the full year.
| Metric | Current Period | Year-on-Year Change |
|---|---|---|
| Full-year revenue growth outlook | 4% – 5% | Prior forecast: 5% |
| Infrastructure revenue | $3.8 billion | -7% |
| Data-center mainframe sales | Not specified | -42% |
| Quarterly free cash flow | $2.5 billion | -$300 million |
| First six months free cash flow | $4.8 billion | Flat |
| Adjusted EPS (quarter) | $2.93 | Not specified |
| Revenue (quarter) | $17.2 billion | +1% |
Management Commentary and Market Reaction
“Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow,” said IBM CFO James Kavanaugh.
In early U.S. premarket trading on Thursday, IBM shares were slightly higher.
(Louis Juricic contributed reporting)
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