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IBM Stock Tumbles 7% Amid Government Contract Suspensions and Economic Uncertainty

Mover TrackerThursday, Apr 24, 2025 6:49 pm ET

1min read

IBM is currently facing the repercussions of recent government budgetary constraints, leading to a significant hit on its stock performance. On April 23, the company disclosed in its first-quarter earnings report that the Trump administration's cost-cutting measures have resulted in a suspension of several government contracts. This revelation caused a notable descent in IBM's shares, with post-market trading experiencing a near 7% drop.

As a part of the newly established "Department of Government Efficiency" during Trump’s tenure, various federal employees have been laid off and billions in government funding have been retracted. IBM revealed that 15 of its government contracts have been affected, amounting to roughly $1 billion. This setback highlights the vulnerability of IBM's consulting arm, with its federal government business representing nearly 10% of the segment's workload.

Analysts have expressed concern over the growing economic uncertainty compounded by US tariffs. IBM's consulting revenue saw a 2% decline to $51 billion, juxtaposing the 1% overall revenue growth to $145 billion for the quarter. Despite these challenges, IBM’s leadership suggests a strong foundation to withstand fluctuating market conditions.

IBM’s CEO, Arvind Krishna, has assured stakeholders that, while uncertainty remains, the company's robust infrastructure should help mitigate risk. Additionally, the company's management is evaluating strategic alternatives to navigate tariff-induced disruptions, particularly focusing on identifying new supply channels.

Overall, despite achieving better-than-anticipated quarterly earnings, the news of postponed government contracts and macroeconomic concerns have overshadowed IBM's positive financial results, contributing to volatility in its stock performance. Analysts have noted IBM's resilience and potential as a stable investment amidst economic turbulence, yet caution that the software division's performance, a major revenue driver, could face challenges moving forward.

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