IBM shares move lower as company beats but opts to maintain guidance

Shares of IBM fell by 8% in after-hours trading on Wednesday, following the release of its first-quarter results that exceeded analyst expectations. The tech giant reported a 9% year-over-year revenue increase but chose to maintain its full-year outlook, which caused investor concerns. In its latest earnings statement, IBM disclosed a net income of $1.22 billion, translating to $1.28 per share. This marks an increase from $1.06 billion, or $1.12 per share, reported in the previous quarter. Notably, the adjusted earnings figures exclude any effects related to acquisitions. IBM's management reiterated their guidance for 2026, predicting over 5% revenue growth at constant currency and an anticipated $1 billion rise in free cash flow. The company’s software revenue surged by 11%, reaching $7.05 billion, surpassing the $7.02 billion consensus among analysts surveyed by StreetAccount. Meanwhile, consulting revenue increased by 4% to $5.27 billion, just short of the expected $5.28 billion. Infrastructure revenue soared by 15% to $3.33 billion, exceeding the $3.16 billion forecast. A standout performance was seen in Z mainframe hardware, which reported a remarkable 51% increase in revenue. Despite this, IBM's shares have seen a decline of approximately 15% in 2026, contrasting with the S&P 500 index's 4% rise during the same timeframe. The stock experienced a sharp 13% drop in February after AI model developer Anthropic suggested that AI could help modernize COBOL code, traditionally run on IBM's mainframes. Rob Thomas, IBM's senior vice president of software, defended the mainframe's relevance, asserting that AI enhances its case rather than diminishing it. In March, IBM also completed its $11 billion acquisition of data streaming software company Confluent. Executives are set to discuss the quarterly results in a conference call starting at 5 p.m. ET.