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IBM shares fell in after-hours trading Wednesday despite the technology giant reporting third-quarter results that surpassed analyst expectations and slightly boosting its full-year sales forecast. The Armonk, N.Y.-based company’s stock declined nearly 5% to $274 following the earnings release.
Third-Quarter Performance
IBM announced adjusted earnings of $2.65 per share for the September-ended quarter, a 15% increase year-over-year. This exceeded FactSet analyst estimates of $2.45 per share. Sales climbed 9% to $16.3 billion, also surpassing the $16.1 billion forecast.
Software revenue, a key segment for IBM, grew 10% to $7.21 billion, aligning closely with analyst predictions. CEO Arvind Krishna highlighted the company’s AI business, which he stated now stands at more than $9.5 billion, as a driver for the improved outlook.
Revised Full-Year Outlook
For the full year, IBM now anticipates revenue growth of more than 5%, an increase from its previous projection of “at least 5%.” The company also raised its free-cash-flow forecast to approximately $14 billion, up from a prior estimate of $13.5 billion.
Stock Market Reaction
Prior to the earnings report, IBM stock had gained 2.2% in Wednesday’s regular trading, contributing to a 33% year-to-date increase. Investors have generally viewed IBM’s expertise in artificial intelligence as a growth catalyst, though the stock experienced a dip in July following its Q2 results, which showed slower-than-expected software segment sales growth.
Shares briefly broke out above a 296.16 cup pattern buy point on October 7, reaching a record high of 301.04. This followed news that IBM would partner with Anthropic to advance the use of AI agents by businesses. The stock has since pulled back, finding support just above its 21-day moving average.
As a component of the Dow Jones Industrial Average, IBM has significantly outperformed the S&P 500. However, its Relative Strength rating has decreased to 71 out of a possible 99, down from 85 three months prior. The stock’s IBD Composite Rating stood at 84 out of 99 before the report.
Key Takeaways
Despite a strong financial performance in its third quarter, marked by exceeding revenue and earnings estimates and an optimistic full-year outlook driven by its AI business, IBM’s stock experienced a decline in after-hours trading, contrasting its robust year-to-date gains.
