IBM Stock Falls 7% After Earnings Beat Fails to Impress

TLDR

• IBM beat Q1 earnings estimates with EPS of $1.91 vs. $1.81 expected
• Revenue came in at $15.92 billion, above the $15.62 billion forecast
• Stock dropped ~7% in after-hours trading despite the beat
• IBM held its full-year guidance steady — no raise, no cut
• Red Hat Enterprise Linux growth decelerated, with supply chain and federal spending flagged as headwinds

IBM reported a solid first quarter on Wednesday, beating Wall Street on both earnings and revenue. But the market wasn’t impressed. The stock fell around 7% in after-hours trading as investors focused on what IBM didn’t do — raise its full-year guidance.

International Business Machines Corporation, IBM

Adjusted EPS came in at $1.91, topping the $1.81 consensus. Revenue hit $15.92 billion, beating estimates of $15.62 billion and marking 9% year-over-year growth.

Net income rose to $1.22 billion, or $1.28 per share, up from $1.06 billion, or $1.12 per share, in Q4 2024. By most measures, it was a clean quarter.

IBM’s software segment posted revenue of $7.05 billion — up 11% and just above the $7.02 billion analyst estimate. Red Hat, a key growth driver since its $34 billion acquisition in 2019, showed 13% revenue growth, accelerating from 10% in Q4.

That acceleration in Red Hat is the kind of number investors usually want to see. But the broader Red Hat Enterprise Linux (RHEL) story was more complicated.

Red Hat Hits a Speed Bump

CFO Jim Kavanaugh flagged a deceleration in RHEL revenue growth, pointing to two culprits: reduced federal government signings following the late-2025 government shutdown, and a disrupted hardware supply chain.

Consulting revenue came in at $5.27 billion, up 4% year-over-year, but just missed the $5.28 billion StreetAccount consensus. Not a disaster, but not a catalyst either.

On the guidance front, IBM held its full-year outlook steady: over 5% revenue growth at constant currency and a $1 billion increase in free cash flow. CEO Arvind Krishna called it a “strong start,” but the company made no move to raise the bar.

Geopolitical Noise, But No Direct Hit

IBM also addressed the ongoing conflict in the Middle East, which escalated when war between the U.S. and Iran broke out on Feb. 28. CEO Krishna said IBM actually saw its strongest Middle East revenue growth in decades during Q1.

IBM also completed its acquisition of Confluent, a data streaming software company, near the end of the quarter. No financial terms were disclosed in the earnings materials.

IBM’s stock is down roughly 15% in 2026, part of a broader software selloff driven by investor concern over AI’s impact on traditional software businesses. Wednesday’s results didn’t change that narrative.

The after-hours drop of around 7% puts the stock at roughly $235, based on Wednesday’s close near $252.

The post IBM Stock Falls 7% After Earnings Beat Fails to Impress appeared first on CoinCentral.