Shares of International Business Machines (NYSE:IBM) experienced their most significant drop in four and a half years after the company’s second-quarter sales fell short of expectations, particularly in its software division. Investors, who have been increasingly optimistic about IBM’s potential, were left disappointed. IBM is a multinational technology company that provides a range of hardware, software, and services. The company operates globally, offering solutions from cloud computing and artificial intelligence to IT infrastructure and consulting.
IBM reported that its software unit sales for the second quarter increased by 10 per cent to $US7.39 billion ($11.2 billion). However, this figure was slightly below the $US7.49 billion average estimate anticipated by analysts. The consulting business, which has been facing a period of sluggish growth, saw a modest revenue increase of 3 per cent, reaching $US5.31 billion.
Enthusiasm surrounding IBM’s software business and its potential for growth in artificial intelligence and quantum computing has been building amongst investors. Since mid-2023, bookings for IBM’s AI business have surpassed $US7.5 billion, up from the $US6 billion reported in April. According to IBM, approximately 80 per cent of these bookings originated from the consulting unit, with the remaining 20 per cent coming from software.
Following the release of the earnings report, IBM’s shares plummeted by as much as 10 per cent after markets opened in New York on Thursday, marking the largest intraday decline since January 22, 2021. Despite this setback, the stock had been performing strongly, up 28 per cent this year through Wednesday’s close, outperforming many of its technology sector peers. The stock ended Thursday’s trading session down 7.6 per cent.