NEW YORK, July 14 (Xinhua) -- IBM shares plummeted in the morning session on Tuesday after the U.S. technology giant reported preliminary second-quarter financial results that fell significantly short of Wall Street expectations.
The hardware, software, and consulting provider reported adjusted earnings of 2.93 U.S. dollars per share on revenue of 17.2 billion dollars for the second quarter. Both figures missed analyst consensus estimates, which had projected earnings of 3.01 dollars per share and revenue of 17.86 billion dollars, according to data and analytics company FactSet.
Following the announcement, IBM shares sank nearly 25 percent in morning trading.
In a letter to investors, IBM Chairman and Chief Executive Officer Arvind Krishna attributed the shortfall primarily to weakness in the company's software and infrastructure businesses, acknowledging execution missteps during a volatile period.
Krishna noted that in the final weeks of June, the company witnessed a sudden shift in client buying patterns. "We saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. While we anticipated some supply chain-related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization."
Additionally, Krishna said that clients were distracted by rapidly evolving, industry-wide cybersecurity concerns. "These conditions require our teams to execute perfectly, and this quarter we faltered," he said. "We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall."
Despite the overall miss, total revenue edged up 1 percent year on year. Segment performance was mixed with software revenue up 5 percent, consulting revenue remaining flat, and infrastructure revenue down 7 percent.
Positive highlights included an 11-percent sequential revenue growth for Red Hat, strong performance from recent acquisitions HashiCorp and Confluent, and a 37-percent surge in distributed infrastructure.
Looking past the quarterly challenges, IBM emphasized its continued aggressive investments in emerging technologies to drive future growth.
The company recently launched "Lightwell," a 5-billion-dollar initiative utilizing frontier artificial intelligence (AI) capabilities and a global workforce of more than 20,000 engineers to address open-source software vulnerabilities. The platform has already secured early adoption from major financial institutions, including Bank of America, Citi, and Goldman Sachs.
