IBM forecasts second-quarter revenue above estimates, soothing tariff worries
IBM said on Wednesday it expects second-quarter revenue above Wall Street estimates, betting on resilient demand for its software services amid economic uncertainty brought on by U.S. President Donald Trump's tariffs.
Shares of the company were up 3.9 per cent after the bell.
The move marked a break from IBM's long-standing practice of not issuing quarterly forecasts and underscored the company's efforts to bolster investor confidence at a time when trade tensions have rattled global markets.
A significant government contractor, IBM is also under pressure from the U.S. administration and its Department of Government Efficiency's cost-cutting drive, which has already weighed on businesses of companies such as Accenture.
"We've chosen now, in light of the very unprecedented dynamic of uncertainty going on in the market, to give a second-quarter revenue guidance range," IBM Chief Financial Officer James Kavanaugh told Reuters in an interview.
"We felt incumbent upon ourselves to give as much transparency as possible to our investor group."
The company forecast June-quarter revenue between $16.40 billion and $16.75 billion, above analysts' average estimate of $16.33 billion, according to data compiled by LSEG.
IBM also maintained its target of achieving at least a 5 per cent revenue growth on a constant currency basis in 2025.
Kavanaugh said that Washington's efforts to cut back on federal spending had led to stop-work orders or cancellation of roughly 15 contracts.
But the hit to IBM is likely to be small as the U.S. federal business is less than 5 per cent of IBM's annual revenue and within that federal unit, about 60 per cent is consulting, Kavanaugh said.
Consulting revenue in the first quarter fell 2 per cent to $5.1 billion, roughly in line with estimates.
Adjusted profit in the March quarter stood at $1.60 per share, compared to the average estimate of $1.40 per share, helped by growth in the high-margin software segment.
IBM's AI Book of Business — a combination of bookings and actual sales across various products — stood at more than $6 billion inception to date, up about $1 billion from the previous quarter.
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