IBM Shares Fall After Q1 Results Show Revenue Decline

Shares of tech giant IBM were heading lower in after-hours trading on Monday after the company reported first quarter financial results and withdrew full-year guidance.

Shares slipped as much as 4% in exteded trading after Wall Street learned that revenue had dropped 3% from a year ago under CEO Ginni Rometty. Earlier this month Arvind Krishna replaced Rometty as CEO.

For the quarter, IBM reported earnings of $1.84 a share adjusted while analysts surveyed by Refinitiv had expected $1.80. Revenue at $17.57 billion was below the $17.62 billion that was expected. Net income for the first quarter totaled $1.18 billion which was down 26% year over year.

The company withdrew its guidance for the full year in the context of Covid-19, according to a statement.

Last quarter IBM’s 2020 forecast was at least $13.35 in earnings per share on an adjusted basis while analysts had been looking for $11.73 in earnings per share on an adjusted basis, according to Refinitiv.

“Looking at the first quarter, through February we were tracking roughly in-line with our expectations,” IBM finance chief Jim Kavanaugh said on a conference call with analysts on Monday.

“As we got into March, the health situation and resulting social distancing became more widespread. As you would expect, we saw noticeable change in client priorities. With that, there was effectively a pause, as clients understandably dealt with their most pressing needs. This was most pronounced in our software business, where the vast majority of transactions typically close-in the last two weeks of the quarter.”

“My approach is straightforward,” new CEO Krishna said. “I am going to focus on growing the value of the company. This includes better aligning our portfolio around hybrid cloud and AI [artificial intelligence] to meet the evolving needs of the market. We will continue investing, including acquisitions. As you have seen, we have divested parts of software and services that did not align with our focus areas. This will continue.”

Disclaimer: We have no position in IBM (NYSE: IBM) and have not been compensated for this article.