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
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Penafian: Entiti XM Group menyediakan perkhidmatan pelaksanaan sahaja dan akses ke Kemudahan Dagangan Atas Talian, yang membolehkan sesorang melihat dan/atau menggunakan kandungan yang ada di dalam atau melalui laman web, tidak bertujuan untuk mengubah atau memperluas, juga tidak mengubah atau mengembangkannya. Akses dan penggunaan tersebut tertakluk kepada: (i) Terma dan Syarat; (ii) Amaran Risiko; dan Penafian Penuh. Oleh itu, kandungan sedemikian disediakan tidak lebih dari sekadar maklumat umum. Terutamanya, perlu diketahui bahawa kandungan Kemudahan Dagangan Atas Talian bukan permintaan, atau tawaran untuk melakukan transaksi dalam pasaran kewangan. Berdagang dalam mana-mana pasaran kewangan melibatkan tahap risiko yang besar terhadap modal anda.
Semua bahan yang diterbitkan di Kemudahan Dagangan Atas Talian kami bertujuan hanya untuk tujuan pendidikan/maklumat dan tidak mengandungi – dan tidak boleh dianggap mengandungi nasihat kewangan, cukai pelaburan atau dagangan dan cadangan, atau rekod harga dagangan kami, atau tawaran, atau permintaan untuk suatu transaksi dalam sebarang instrumen kewangan atau promosi kewangan yang tidak diminta kepada anda.
Sebarang kandungan pihak ketiga serta kandungan yang disediakan oleh XM, seperti pendapat, berita, penyelidikan, analisis, harga, maklumat lain atau pautan ke laman web pihak ketiga yang terdapat dalam laman web ini disediakan berdasarkan "seadanya" sebagai ulasan pasaran umum dan bukanlah nasihat pelaburan. Sesuai dengan apa-apa kandungan yang ditafsir sebagai penyelidikan pelaburan, anda mestilah ambil perhatian dan menerima bahawa kandungan tersebut tidak bertujuan dan tidak sediakan berdasarkan keperluan undang-undang yang direka untuk mempromosikan penyelidikan pelaburan bebas dan oleh itu, ia dianggap sebagai komunikasi pemasaran di bawah peraturan dan undang-undang yang berkaitan. SIla pastikan bahawa anda telah membaca dan memahami Notifikasi mengenai Penyelidikan Pelaburan Bukan Bebas dan Amaran Risiko mengenai maklumat di atas yang boleh diakses di sini.
