IBM Q2 revenue misses, cuts FY revenue growth forecast

Overview

• US technology firm's Q2 revenue declined 1% yr/yr, missing analyst expectations

• EPS for Q2 was $2.27

• Company updated full-year outlook to 4-5% constant currency revenue growth, down from prior expectation of more than 5% growth

Outlook

• IBM now expects full-year constant currency revenue growth of 4-5%

• Company continues to expect full-year free cash flow to increase by about $1 bln year-over-year

• IBM expects improved pre-tax income margin expansion for the full year

Result Drivers

• SOFTWARE GROWTH - Software segment revenue rose 5%, led by AI-ready solutions such as Red Hat, watsonx, HashiCorp, and Confluent

• INFRASTRUCTURE DECLINE - Infrastructure revenue fell 7%, as IBM Z dropped 42%, offset in part by 37% growth in distributed infrastructure

• PRODUCTIVITY INITIATIVES - Company said it is driving productivity through AI, automation, and supply chain optimization to support margin and free cash flow

Company press release: ID:nPn7kZsX1a

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 14 "strong buy" or "buy", 11 "hold" and 2 "sell" or "strong sell"

• The average consensus recommendation for the it services consulting peer group is "buy"

• Wall Street's median 12-month price target for International Business Machines Corp is $256.22, about 21.7% above its July 21 closing price of $210.50

• The stock recently traded at 17 times the next 12-month earnings vs. a P/E of 19 three months ago

Reuters Recommended Reads

• July 21 - Pegasystems Q2 adjusted EPS misses as AI shifts delay purchases

• July 22 - AI investment boom puts Big Tech's free cash flow under pressure

• July 22 - Finland's TietoEVRY Q2 revenue falls on consulting demand weakens

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)