IBM shares fell more than 6% on Thursday after the company reported that reduced spending among clients on non-GenAI projects hurt its consulting segment.
That trend could send the company’s estimated $214 billion market value down by more than $13 billion if losses persist.
The uncertain economic outlook has led IBM clients to reduce discretionary spending and prioritize GenAI projects, which has impacted the growth of consulting services.
According to analysts at RBC Capital Markets, the infrastructure segment, which has performed well so far this year, has slowed ahead of the FY/25 refresh cycle, and consulting has faced discretionary spending difficulties, reflected in contract signings decreasing.
IBM’s total revenue rose about 1 percent to $14.97 billion, missing expectations for $15.07 billion.
Analysts at Piper Sandler say stagnant discretionary spending shows continued restraints in IT budgets in the near term, particularly for non-AI projects, but there is a glimmer of hope for sustainable growth from 2025.
On the other hand, IBM’s software segment had a positive performance in the third quarter with a 9.7% increase in revenue to $6.52 billion on the back of expanding cloud infrastructure for GenAI technology.
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The company expects revenue trends to continue next quarter, with strength coming from software, but headwinds in consulting due to discretionary spending and infrastructure ahead of next year’s refresh.
Analysts at BofA Securities forecast that consulting will remain weaker in the first half of 2025, but will be offset by an acceleration in the software and mainframe cycle.
(source: AFP)
Source: jurnalul.ro
