Latest news with #JimKavanaugh
Yahoo
3 days ago
- Business
- Yahoo
5 silly earnings season stock price moves!
Earnings season is moving along swimmingly. All things considered, this summer's reporting period could have really sucked. Every CEO could've blamed Trump trade tensions for misses in any parts of the business. Meanwhile, the results could've straight up not justified the valuations we are seeing in a hot market. About 135 S&P 500 (^GSPC) companies, or 29% of the index's market cap, have reported earnings at the time of this writing. Sales and earnings have increased by a solid 6.5% and 7.2%, respectively. The average stock price has increased 1% post-results. But sometimes Mr. Market gets it wrong during earnings season, in my view. The market will overly punish a company for something perceived as a big deal in the moment but minor in the grand scheme. Or, it won't reward a company enough for strong results that feed into a long-term investment case. Here are five reactions this week from earnings that left me scratching my head. IBM What more could the market want from Big Blue? Software and infrastructure sales are up 10% and 14%, respectively. The company increased its full-year operating margin expectations. CFO Jim Kavanaugh told me the company is finding added cost savings, lifting the margin outlook. Further, IBM has an AI story to tell — and it's a good one! "I think you're starting to see the beginnings of scale of generative AI, which is accelerating. Last quarter, we did about six billion dollars [of AI business]. Now we're over seven and a half billion," Kavanaugh added. IBM shares finished Thursday's session (morning after earnings) down 6%. "We would recommend opportunistic purchases for defensive-minded investors ($310 12-month target), although post-report selling may persist for a short period," Stifel analyst David Grossman called out. AT&T AT&T's (T) stock barely finished in the green on Wednesday's earnings day. Similar to IBM, what else could investors have been looking for? The company gained postpaid phone subscribers in the second quarter, while rival Verizon lost customers (though T-Mobile stole the telecom show — see below). Free cash flow — always an important metric for a telecom — rose $400 million year over year. And AT&T called out a $6.5 billion to $8 billion cash tax savings from 2025 to 2027 as a result of the One Big Beautiful Bill Act. "We are investing $23 to $24 billion on a go forward basis each year into our network. Historically, we would have had to amortize that capital and take those deductions over time. The bonus depreciation provisions in the bill allow us to expense those immediately," AT&T CFO Pascal Desroches told me. Expect the company to spend a good chunk of these savings on stock buybacks. The stock got slapped with a top pick call by JPMorgan on Thursday. "Long-term, we believe AT&T convergence playbook, accelerating fiber build to 50m+ organic locations, owner economics, and go-to-market scale will allow the company to derive industry-leading unit economics," JPMorgan analyst Sebastiano Petti said. Chipotle I get why Chipotle's (CMG) stock got shredded by 13% post-results. Chipotle is valued as a growth stock, and growth took a hit in the second quarter. But I don't believe there's anything fundamentally wrong. The company is still aggressively opening new stores and has a very devoted customer base. I fancy it just needs to market its value proposition, which it plans to do more of in the third quarter. Overlooked on the earnings call is Chipotle noting that sales have returned to growth in July. It's planning to release limited-time offerings in 2026 at a faster pace. And I like how the company is doubling down on restaurant technology. "2Q was also CMG toughest lap for 2024 share gains, and, even if there is the opportunity for more ownership of recent trends/urgency in tone, we believe it is indeed building/increasingly deploying a marketing/innovation toolbox that will drive growing confidence in a more stable same-store sales trajectory into 2H and beyond," Citi analyst Jon Tower wrote. T-Mobile T-Mobile's (TMUS) stock gained a solid 5.8% on Thursday after reporting on Wednesday post-market close. I think that is 5% less than the quarter deserved. The telecom giant easily beat analyst estimates. It gained the most net new customers compared to its competitors. T-Mobile CEO Mike Sievert told me on Yahoo Finance that the company's steady value messaging is helping it gain market share. "T-Mobile's value proposition to customers is elegantly simple. Best network, lowest price," MoffettNathanson senior analyst Craig Moffett said. The company also hiked its full-year operating profit margin guidance. Next catalysts for the company: the upcoming closure of the US Cellular acquisition, a greater pace of stock buybacks thanks to the Trump tax bill, and perhaps more acquisitions. Alphabet You have to be kidding me here. Alphabet (GOOG, GOOGL) is trading at only 19.3 times forward earnings (the S&P 500 is at 24 times), and the stock goes up just 1% on Thursday post-earnings? Did anyone listen to the earnings call? I did: The company said revenue growth accelerated throughout the business. Sales increased 14% year over year in the second quarter, a brisker pace compared to the 12% in the first quarter. Cloud business is rocking (positive read-through to Amazon (AMZN) and Microsoft (MSFT) earnings next week). Alphabet said it's not losing key AI talent to the giant wallet of Meta (META). The discussion around AI and search was very bullish. YouTube is crushing it. "AI (beast) mode it's time to close the valuation gap," KeyBanc analyst Justin Patterson said. Yahoo Finance's Invest Conference Is Coming Up! Join me and the Yahoo Finance newsroom for our annual Invest conference, taking place in New York City, November 12-13. We just added several new speakers to an already awesome lineup. More on the way. Learn more about the conference and register today! Trust, you will want to be in this room ahead of 2026. Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email
Yahoo
3 days ago
- Business
- Yahoo
5 silly earnings season stock price moves!
Earnings season is moving along swimmingly. All things considered, this summer's reporting period could have really sucked. Every CEO could've blamed Trump trade tensions for misses in any parts of the business. Meanwhile, the results could've straight up not justified the valuations we are seeing in a hot market. About 135 S&P 500 (^GSPC) companies, or 29% of the index's market cap, have reported earnings at the time of this writing. Sales and earnings have increased by a solid 6.5% and 7.2%, respectively. The average stock price has increased 1% post-results. But sometimes Mr. Market gets it wrong during earnings season, in my view. The market will overly punish a company for something perceived as a big deal in the moment but minor in the grand scheme. Or, it won't reward a company enough for strong results that feed into a long-term investment case. Here are five reactions this week from earnings that left me scratching my head. IBM What more could the market want from Big Blue? Software and infrastructure sales are up 10% and 14%, respectively. The company increased its full-year operating margin expectations. CFO Jim Kavanaugh told me the company is finding added cost savings, lifting the margin outlook. Further, IBM has an AI story to tell — and it's a good one! "I think you're starting to see the beginnings of scale of generative AI, which is accelerating. Last quarter, we did about six billion dollars [of AI business]. Now we're over seven and a half billion," Kavanaugh added. IBM shares finished Thursday's session (morning after earnings) down 6%. "We would recommend opportunistic purchases for defensive-minded investors ($310 12-month target), although post-report selling may persist for a short period," Stifel analyst David Grossman called out. AT&T AT&T's (T) stock barely finished in the green on Wednesday's earnings day. Similar to IBM, what else could investors have been looking for? The company gained postpaid phone subscribers in the second quarter, while rival Verizon lost customers (though T-Mobile stole the telecom show — see below). Free cash flow — always an important metric for a telecom — rose $400 million year over year. And AT&T called out a $6.5 billion to $8 billion cash tax savings from 2025 to 2027 as a result of the One Big Beautiful Bill Act. "We are investing $23 to $24 billion on a go forward basis each year into our network. Historically, we would have had to amortize that capital and take those deductions over time. The bonus depreciation provisions in the bill allow us to expense those immediately," AT&T CFO Pascal Desroches told me. Expect the company to spend a good chunk of these savings on stock buybacks. The stock got slapped with a top pick call by JPMorgan on Thursday. "Long-term, we believe AT&T convergence playbook, accelerating fiber build to 50m+ organic locations, owner economics, and go-to-market scale will allow the company to derive industry-leading unit economics," JPMorgan analyst Sebastiano Petti said. Chipotle I get why Chipotle's (CMG) stock got shredded by 13% post-results. Chipotle is valued as a growth stock, and growth took a hit in the second quarter. But I don't believe there's anything fundamentally wrong. The company is still aggressively opening new stores and has a very devoted customer base. I fancy it just needs to market its value proposition, which it plans to do more of in the third quarter. Overlooked on the earnings call is Chipotle noting that sales have returned to growth in July. It's planning to release limited-time offerings in 2026 at a faster pace. And I like how the company is doubling down on restaurant technology. "2Q was also CMG toughest lap for 2024 share gains, and, even if there is the opportunity for more ownership of recent trends/urgency in tone, we believe it is indeed building/increasingly deploying a marketing/innovation toolbox that will drive growing confidence in a more stable same-store sales trajectory into 2H and beyond," Citi analyst Jon Tower wrote. T-Mobile T-Mobile's (TMUS) stock gained a solid 5.8% on Thursday after reporting on Wednesday post-market close. I think that is 5% less than the quarter deserved. The telecom giant easily beat analyst estimates. It gained the most net new customers compared to its competitors. T-Mobile CEO Mike Sievert told me on Yahoo Finance that the company's steady value messaging is helping it gain market share. "T-Mobile's value proposition to customers is elegantly simple. Best network, lowest price," MoffettNathanson senior analyst Craig Moffett said. The company also hiked its full-year operating profit margin guidance. Next catalysts for the company: the upcoming closure of the US Cellular acquisition, a greater pace of stock buybacks thanks to the Trump tax bill, and perhaps more acquisitions. Alphabet You have to be kidding me here. Alphabet (GOOG, GOOGL) is trading at only 19.3 times forward earnings (the S&P 500 is at 24 times), and the stock goes up just 1% on Thursday post-earnings? Did anyone listen to the earnings call? I did: The company said revenue growth accelerated throughout the business. Sales increased 14% year over year in the second quarter, a brisker pace compared to the 12% in the first quarter. Cloud business is rocking (positive read-through to Amazon (AMZN) and Microsoft (MSFT) earnings next week). Alphabet said it's not losing key AI talent to the giant wallet of Meta (META). The discussion around AI and search was very bullish. YouTube is crushing it. "AI (beast) mode it's time to close the valuation gap," KeyBanc analyst Justin Patterson said. Yahoo Finance's Invest Conference Is Coming Up! Join me and the Yahoo Finance newsroom for our annual Invest conference, taking place in New York City, November 12-13. We just added several new speakers to an already awesome lineup. More on the way. Learn more about the conference and register today! Trust, you will want to be in this room ahead of 2026. Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email Sign in to access your portfolio
Globe and Mail
5 days ago
- Business
- Globe and Mail
IBM Boosts Forecast on AI and Red Hat
International Business Machines (NYSE:IBM) reported 2Q 2025 earnings on July 23, 2025, delivering $17 billion in revenue and $4.8 billion in first-half free cash flow, driven by standout software and infrastructure gains. The company raised its full-year free cash flow outlook to above $13.5 billion and affirmed revenue growth guidance above 5%, supported by double-digit Red Hat growth, robust automation, and surging AI-related bookings. Key insights below highlight IBM's accelerating software momentum, transformation in productivity, and expanding AI footprint. Red Hat and automation fuel IBM software acceleration Red Hat contributed 3.5 percentage points of organic software growth, while automation grew 15% in the first half of 2025, and HashiCorp delivered a strong initial performance following its acquisition. OpenShift achieved $1.7 billion in annual recurring revenue (ARR), and Red Hat's virtualization pipeline grew by over $300 million in total bookings through the first three quarters. "OpenShift growing revenue more than 20% with ARR now at $1.7 billion. Automation grew 14%, with HashiCorp off to a strong start … We accelerated our Red Hat performance first quarter, second quarter by an incremental point, now growing about 14.5% … our pipeline in the second half is 3x last year across our entire automation portfolio with regards to HashiCorp." -- Jim Kavanaugh, Senior Vice President and Chief Financial Officer This sustained outperformance in hybrid cloud and automation positions IBM to deliver near-double-digit software revenue growth for FY2025 at constant currency, non-GAAP, driving a favorable long-term revenue mix shift and expanding recurring revenue base. IBM productivity transformation expands margins and financial flexibility IBM expanded its operating gross profit margin by 230 basis points, reflecting disciplined execution and productivity initiatives including embedding AI into workflows and optimizing the supply chain by moving distributed infrastructure manufacturing to a strategic partner. IBM exited 2024 with $3.5 billion in annual run rate savings and now expects to reach $4.5 billion by the end of 2025, fueling further margin expansion and cash flow conversion. "We are taking up the year on our productivity initiatives. We exited last year, we talked about $3.5 billion of productivity that we've been able to fundamentally drive out of this business … that's given us guidance and confidence to raise that to $4.5 billion. That flows to operating margin. We're taking our operating margins up from a half a point to now roughly a point … and then we're flowing that all the way down through the cash flow. High quality, sustainable cash flow generation." -- Jim Kavanaugh, Senior Vice President and Chief Financial Officer Escalating productivity-driven savings provide IBM with headroom for strategic M&A and ongoing innovation investment. AI portfolio and ecosystem drive differentiated growth at scale IBM's cumulative Gen AI book of business surpassed $7.5 billion since inception, with AI now surpassing 10% of consulting revenue at a more than three-point margin premium compared to non-AI work. Over 150 prebuilt agents and deep partnerships with Oracle, Amazon Web Services (AWS), Salesforce, and others are embedding Watson x solutions across customer workflows, while unique offerings like Code Assistant for z and the newly launched z17 mainframe further strengthen IBM's competitive position in scalable enterprise AI. "Our Gen AI book of business now stands at over $7.5 billion inception to date, with momentum accelerating quarter over quarter. We are seeing strong demand for our AI agents and assistants, REL AI, Granite Models, as well as an accelerating need for our consulting services to deploy AI. Just last week, IBM was recognized as an emerging leader in the first-ever Gartner emerging market quadrant for Gen AI consulting and implementation services." -- Arvind Krishna, Chairman, President, and Chief Executive Officer IBM's leadership in enterprise-scale AI and its partner ecosystem create a powerful flywheel effect, deepening client engagement and underpinning the company's long-term secular growth thesis in AI-powered automation and hybrid cloud environments. Looking Ahead For the full year, IBM reaffirmed constant currency revenue growth of 5% plus (non-GAAP) and raised free cash flow guidance above $13.5 billion. Management expects software to approach double-digit revenue growth, with Red Hat growth in the mid-teens and low-single-digit gains in transaction processing are expected as the z17 mainframe cycle accelerates. Operating pre-tax margin is now expected to expand by about one point for the full year, and IBM is comfortable with consensus expectations for revenue and profit. Where to invest $1,000 right now When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor's total average return is 1,037%* — a market-crushing outperformance compared to 182% for the S&P 500. They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor. See the stocks » *Stock Advisor returns as of July 21, 2025 JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, International Business Machines, and Oracle. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
Business Times
6 days ago
- Business
- Business Times
IBM's software sales disappoint, eclipsing AI mainframe revival
[BENGALURU] IBM beat Wall Street estimates for second-quarter revenue and profit on Wednesday (Jul 23), but lower-than-expected sales in its mainstay software segment overshadowed a renewal in demand for the mainframe business spurred by artificial intelligence (AI) upgrades. IBM's shares fell 5 per cent in extended trading, after a nearly 30 per cent rise this year driven by investors betting on prioritised software spending as businesses navigated macroeconomic uncertainty and ongoing trade negotiations. 'You are seeing the stock pull back, because there's just not a lot of room to miss,' said Dan Morgan, senior portfolio manager at Synovus Trust, which holds shares in IBM. 'This would be more evidence that software is not growing at the pace that the Street was expecting.' IBM's software segment, which has traditionally been a bright spot, reported sales of US$7.39 billion, missing analysts' average estimate of US$7.41 billion, according to data compiled by LSEG. Customers funnelled investment towards IBM's latest AI-specialised mainframes, diverting revenue from transaction processing, which primarily accounts for software run on the mainframe, finance chief Jim Kavanaugh said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Transaction processing sales, which were mostly flat in the quarter, are housed in the software unit, dragging the segment's performance. The infrastructure segment, which houses its mainframe, reported revenue of US$4.14 billion, beating estimates of US$3.81 billion. The Big Blue reported revenue of US$16.98 billion for the June quarter, beating estimates of US$16.59 billion. Adjusted earnings of US$2.80 per share also beat estimates. Consulting sales grew 3 per cent, ending five consecutive quarters of revenue declines, as businesses seek expertise on integrating AI products. However, given the 'current demand environment', IBM is 'prudently cautious' on how much the consulting segment might contribute to further growth this year, Kavanaugh said during a post-earnings call. Its 'AI book of business', which combines bookings and actual sales, grew to US$7.5 billion, up US$1.5 billion from the previous quarter. IBM did not provide a forecast for the third quarter, after it broke tradition in April and issued a one-off quarterly outlook to give investors more clarity at a time when US President Donald Trump's global tariffs were first going into effect. REUTERS
Yahoo
7 days ago
- Business
- Yahoo
IBM results beat estimates on AI mainframe refresh, consulting revival
(Reuters) -IBM beat Wall Street estimates for second-quarter revenue and profit on Wednesday, helped by renewed sales in its mainframe business as artificial intelligence upgrades spurred demand for the systems, which are capable of processing vast amounts of data. Clients have focused on investing in AI infrastructure expansion as macroeconomic uncertainty and ongoing trade negotiations prompt businesses to prioritize spending on the booming technology. Shares of the company fell 4% in extended trading, after a nearly 30% rise this year. "All of us are still operating in a very dynamic macroeconomic environment," finance chief Jim Kavanaugh told Reuters. Sales of IBM's latest mainframe — powered by chips specialized for AI applications — kicked off in June, boosting second-quarter revenue following a three-year cycle for the system's previous version. The Big Blue reported revenue of $16.98 billion for the June quarter, up nearly 8% from last year and beating the analysts' average estimate of $16.59 billion, according to data compiled by LSEG. The infrastructure segment, which houses its mainframe, reported revenue of $4.14 billion, beating estimates of $3.81 billion. IBM did not provide a forecast for the third quarter, after it broke tradition in April and issued a one-off quarterly outlook to give investors more clarity at a time when U.S. President Donald Trump's global tariffs were first going into effect. "That quarterly guidance was really driven by the unprecedented volatility of the foreign exchange markets and what we were dealing with 90 days ago," Kavanaugh said. "What is different over the past 90 days — the FX world is kind of stabilized ... so we reverted back to our standard practice." Sales in the consulting business also grew 3% in the quarter to $5.31 billion, ending five consecutive quarters of revenue declines. Businesses are increasingly turning to IBM's consulting business as they seek expertise on integrating AI products and conducting operations in a rapidly evolving economic environment. Its "AI book of business," which combines bookings and actual sales across various products, grew to $7.5 billion, up $1.5 billion from the previous quarter. Second-quarter adjusted earnings of $2.80 per share also beat estimates. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
