IBM Stock Price Down 8.78%, Despite Strong Q2 Earnings

IBM's stock has fallen 8.78% despite a strong Q2 earnings report that exceeded expectations for revenue and profit. The decline was driven by weaker-than-expected sales in the core software segment, while the infrastructure segment showed robust performance. Analysts maintain a moderate buy consensus on IBM stock, citing its strategic focus on AI and hybrid cloud growth, as well as its strong infrastructure segment.

IBM's stock experienced a significant drop of 8.78% on Wednesday, despite the tech conglomerate reporting robust second-quarter earnings that exceeded Wall Street projections. The decline was primarily attributed to weaker-than-expected sales in the core software segment, while the infrastructure segment demonstrated strong performance [1].

The company's earnings per share (EPS) reached $2.80, surpassing the expected $2.64, while revenue climbed to $16.98 billion, exceeding the anticipated $16.59 billion [1]. IBM's software revenue increased by approximately 10% to $7.39 billion, though it fell short of the $7.43 billion consensus among analysts surveyed by StreetAccount. The hybrid cloud revenue, including Red Hat, showed 16% growth [1].

IBM's CEO, Arvind Krishna, attributed the strong performance to ongoing momentum in its software and infrastructure segments, highlighting robust growth from Red Hat and the recent launch of its z17 mainframe. However, he acknowledged that geopolitical tensions and constrained U.S. federal spending in the first half of the year have prompted some clients to move cautiously [1].

Analysts maintain a moderate buy consensus on IBM stock, citing its strategic focus on AI and hybrid cloud growth, as well as its strong infrastructure segment. The company's software mix now approaches 45% of revenue, and its AI book of business stands at $7.5 billion from inception to the present, up from $6 billion in April [1].

IBM's infrastructure revenue went up 14% to $4.14 billion, above the $3.75 billion StreetAccount average estimate. The company also announced the acquisition of data and artificial intelligence consulting firm Hakkoda during the quarter [1].

Looking ahead, IBM called for over $13.5 billion in 2025 free cash flow, similar to its projection from April. The company still expects at least 5% revenue growth at constant currency for the year [1].

IBM's stock has rebounded somewhat since the earnings report, trading at $260.58 as of Wednesday's close, down from $282.22 just before the earnings announcement [2].

References:
[1] https://www.cnbc.com/2025/07/23/ibm-q2-earnings-report-2025.html
[2] https://www.tradingview.com/news/stockstory:4587dd447094b:0-ibm-q2-deep-dive-software-momentum-and-ai-adoption-offset-consulting-caution/