IBM Reports $17 Billion Preliminary Revenue As AI Bookings Top $12 Billion

IBM’s preliminary second-quarter revenue rose 1 per cent year over year to roughly $17 billion, but missed the roughly $18 billion analysts had expected.

The gap sent shares down as much as 17 per cent in premarket trading, wiping out part of a rally that had lifted the stock 30 per cent in May.

The Next Web reported the figures from IBM’s preliminary update and chief executive Arvind Krishna’s investor letter.

Revenue and margin miss

The shortfall extended across much of IBM’s business.

Software revenue increased 5 per cent, with Red Hat up 11 per cent, but both results fell below forecasts.

Consulting was essentially flat, while infrastructure revenue dropped 7 per cent as clients pulled back on mainframe and storage purchases.

Krishna called the quarter disappointing and pointed to execution problems, spending shifts and large deals that failed to close before the end of the quarter.

Some clients also redirected capital spending during the final weeks of June toward servers, storage and memory ahead of expected tariff-related price increases.

The weaker revenue came with narrower margins.

Adjusted earnings per share were nearly $3, below the roughly $3 consensus.

Gross profit margin fell to just under 58 per cent, about one percentage point below the year-earlier level, while pre-tax margin slipped to just over 14 per cent.

Together, the revenue miss and margin pressure drove the sharp sell-off.

Where spending shifted

The late-quarter move toward server hardware, storage systems and memory helps explain the contrast within IBM’s infrastructure business.

Demand did not disappear across enterprise technology, but spending arrived in areas that did not prevent IBM’s infrastructure revenue from declining.

The large deals that missed the quarter added a separate execution problem, and IBM did not identify the customers or transactions involved in the preliminary update.

The stock had gained 30 per cent in May as bullish analyst coverage supported expectations that IBM’s AI and enterprise software businesses were beginning to reshape the company.

Monday’s preliminary figures challenged the timing of that transition, particularly as consulting stagnated and legacy infrastructure weakened.

AI bookings and next results

Artificial intelligence was the strongest figure in the update.

IBM said cumulative AI bookings had surpassed $12 billion, reflecting continued enterprise demand for AI consulting and infrastructure even as total quarterly revenue fell short.

The company has invested in AI partnerships, including a recent enterprise cybersecurity tie-up with OpenAI, and Krishna has described AI as the growth engine that will reshape IBM’s revenue mix.

The preliminary update did not connect the $12 billion bookings total to recognised quarterly revenue or divide it between consulting and infrastructure.

IBM plans to release its full quarterly results later this month.