IBM reported disappointing quarterly earnings Wednesday, with results falling well short of Wall Street expectations despite $17.2 billion in revenue and $2.2 billion in net earnings. CEO Arvind Krishna had previously warned investors that results would miss projections, a disclosure that preceded the stock’s steepest single-day drop on record.
The company also lowered its full-year growth forecast after its mainframe business declined 42%. CFO Jim Kavanaughexplained that mainframe sales carry outsized importance because IBM generates roughly three dollars in software revenue for every dollar of mainframe hardware sold.
Krishna attributed the shortfall to customers redirecting budgets toward other hardware and data center equipment amid steep price increases, driven largely by AI-related demand for components like memory. He said clients facing cost hikes of 15% to 30% opted to delay mainframe purchases in favor of addressing more urgent hardware needs elsewhere.
Despite the setback, Krishna expressed confidence that affected customers will eventually return to purchase new mainframes and associated software contracts, noting that some have already done so this quarter. He said the company has seen no indication that clients are abandoning the mainframe platform altogether.
