International Business Machines Corp (NYSE:IBM) drew a more cautious outlook from analysts after preliminary second quarter results missed expectations, with Bank of America and UBS citing weaker software and infrastructure demand, shifting customer capital spending priorities…
d delayed large deals as key challenges for the company. Bank of America noted that IBM’s preliminary Q2 revenue of $17.2 billion came in below the $17.9 billion consensus estimate, while adjusted earnings per share of $2.93 missed expectations of $3.02
The analysts wrote that the revenue miss was larger than expected, driven primarily by weaker Software and Infrastructure results, although profitability held up better. The firm highlighted IBM’s comments that customers reprioritized capital expenditures late in the quarter, affecting spending across its portfolio. Bank of America also pointed to execution issues, large deal slippage and cybersecurity concerns among clients as factors contributing to the weaker performance.
IBM’s software business was a major source of weakness, with revenue growth of 5% compared with Bank of America’s expectation for double-digit growth. The analysts noted that Red Hat (NYSE:RHT) performed slightly ahead of expectations, growing 11% year over year, but said the main shortfall appeared to come from transaction processing, which was likely down by a high single-digit percentage. They also pointed to weaker-than-expected organic contributions from IBM’s data and automation offerings.