International Business Machines Corporation (NYSE:IBM) shares are trading lower Thursday despite third-quarter results that beat estimates on earnings and revenue, reversing a gain of about 4% from Wednesday’s session.
- IBM stock is showing notable weakness. Why are IBM shares down?
IBM Beats on Earnings and Revenue as Software Growth Accelerates
IBM reported third-quarter adjusted earnings per share of $2.95, beating the consensus estimate of $2.86. It reported revenue of $17.103 billion, up 5% from a year earlier, beating the consensus estimate of $16.822 billion. Software revenue rose 8% to $7.8 billion, consulting was flat at $5.3 billion, and infrastructure rose 4% to $3.7 billion. Cash flow from operations was $4 billion, and free cash flow was $3 billion. IBM ended the period with $11.1 billion of cash, restricted cash and marketable securities. Its board approved a quarterly dividend of $1.69 per share, payable Dec. 10 to shareholders of record as of Nov. 10.
“Our clients are now deploying Super Intelligence in ways that transform entire operating models, instead of simply addressing narrow or novel problems,” said Arvind Krishna, chairman, president and CEO of IBM.
IBM Affirms Its Full-Year Revenue Guidance and Raises Its Cash Flow Outlook
IBM affirmed fiscal 2026 sales guidance of $70.236 billion to $70.912 billion, versus the consensus estimate of $70.343 billion. It kept its constant-currency revenue growth target at 4% to 5%. It also raised its full-year free cash flow outlook, and now expects an increase of more than $1 billion from a year earlier.
Why IBM Shares Are Lower Despite the Beat
According to Investing.com, IBM’s stock surged after hours Wednesday and then reversed sharply once management took to the conference call. Krishna said on the call that corporate clients are growing concerned about whether AI spending is generating measurable returns. IBM reported an adjusted gross margin of 58.5%, below the 59.1% consensus, and its consulting segment’s gross margin narrowed from the prior quarter. It also kept its full-year constant-currency revenue growth target unchanged at 4% to 5%, which disappointed investors hoping for an upward revision after the beat. Investing.com also cited a senior vice president’s disclosed reduction of their IBM stake by more than a third as a minor overhang, and said the broader market was lower, with the Nasdaq down 1.8% and the S&P 500 down 1.0%.
IBM Shares Drop
IBM Price Action: At the time of publication, IBM shares are trading 4.56% lower at $240.00, according to data from Benzinga Pro.
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