IBM misses third-quarter revenue estimates as consulting drags; shares fall
Adds CEO comment in paragraph 4, CFO comment in paragraph 7
By Arsheeya Bajwa
Oct 23 (Reuters) -International Business Machines IBM.N missed analysts' estimates for third-quarter revenue on Wednesday, hurt by weakness in its consulting segment as businesses cut back on discretionary expenses, coupled with declines in the infrastructure business.
IBM's shares fell about 4% in extended trading after rising more than 40% this year, as investors bet on the company's potential to benefit from generative AI through its software and consulting services.
An uncertain macroeconomic backdrop has prompted businesses to prioritize expenses on long-term consulting projects centered around AI, impacting IBM's sales from shorter-term deals.
"A pause in discretionary spending is impacting our consulting business," CEO Arvind Krishna said during a post-earnings call.
Revenue grew about 1% to $14.97 billion, missing estimates of $15.07 billion, according to data compiled by LSEG. Revenue from consulting was relatively flat in the third quarter.
The company's AI Book of Business — a combination of bookings and actual sales across various products — grew to $3 billion, up $1 billion from the second quarter.
"Many clients are looking at how to free up cost and productivity to go invest in GenAI," Chief Financial Officer James Kavanaugh told Reuters.
The book was driven by consulting, constituted of one-fifth software and four-fifths consulting in the third quarter. However, this growth is not yet reflected in the overall consulting segment.
"Client budgets are not expanding and AI consulting, rather than being additive, is cannibalizing other engagements," said Michael Ashley Schulman, chief investment officer at Running Point Capital.
Conversely, IBM's software segment recorded its biggest jump in quarterly revenue in three years, as enterprises expand cloud infrastructure to accommodate genAI tech.
Software growth has helped drive profit of $2.30 per share for the third quarter, beating analysts' average estimate of $2.23 per share, according to data compiled by LSEG.
The company's infrastructure segment, which houses IBM's mainframe, saw revenue decline 7% as the business is at the end of a three-year product cycle, when sales cyclically slump.
Reporting by Arsheeya Bajwa in Bengaluru; Editing by Alan Barona
Berita Terbaru
Pengungkapan: Entitas XM Group menyediakan layanan khusus eksekusi dan akses ke Fasilitas Trading Online kami, yang memungkinkan Anda untuk melihat dan/atau menggunakan konten yang tersedia pada atau melalui situs, yang tidak untuk mengubah atau memperluas, serta tidak mengubah atau memperluas hal tersebut. Akses dan penggunaan ini selalu sesuai dengan: (i) Syarat dan Ketentuan; (ii) Peringatan Risiko; dan (iii) Pengungkapan Penuh. Oleh karena itu, konten disediakan hanya sebagai informasi umum. Anda juga harus ketahui bahwa konten Fasilitas Trading Online kami bukan sebagai ajakan atau tawaran untuk untuk melakukan transaksi apa pun di pasar finansial. Trading di pasar finansial mana pun melibatkan tingkat risiko yang signifikan pada modal Anda.
Semua materi yang diterbitkan di Fasilitas Trading Online kami hanya untuk tujuan edukasi/informasi dan tidak boleh mengandung nasihat dan rekomendasi finansial, pajak investasi atau trading, catatan harga trading kami, penawaran, permintaan, transaksi dalam instrumen finansial apa pun atau promo finansial untuk Anda yang tidak diminta.
Konten pihak ketiga apa pun, serta konten yang disiapkan oleh XM, seperti opini, berita, riset, analisis, harga, informasi lain atau link ke situs pihak ketiga yang tersedia "sebagaimana adanya", sebagai komentar pasar umum dan bukan menjadi nasihat investasi. Sejauh konten apa pun ditafsirkan sebagai penelitian investasi, Anda harus memperhatikan dan menerima bahwa konten tersebut tidak dimaksudkan dan belum disiapkan sesuai dengan persyaratan hukum yang dirancang untuk mempromosikan kemandirian riset investasi dan dengan demikian akan dianggap sebagai komunikasi pemasaran di bawah hukum dan peraturan yang relevan. Mohon dipastikan bahwa Anda telah membaca dan memahami Notifikasi pada Riset Investasi Non-Independen dan Peringatan Risiko kami mengenai informasi di atas, yang dapat diakses disini.
