IBM just delivered a mixed bag that's got Wall Street scratching its head. The tech giant crushed third-quarter estimates and raised its full-year outlook, riding what CEO Arvind Krishna calls "artificial intelligence tailwinds" - but investors sent shares tumbling 5% in after-hours trading anyway. It's a perfect example of how even good news can't escape today's brutal earnings expectations.
IBM just proved that beating Wall Street's numbers doesn't guarantee a victory lap anymore. The Armonk-based tech veteran delivered third-quarter results that should have been cause for celebration - earnings per share of $2.65 crushed the $2.45 estimate, while revenue of $16.33 billion topped projections by a comfortable margin. Yet shares plunged 5% in extended trading, highlighting how investor sentiment has shifted in this AI-dominated earnings season.
The paradox gets even stranger when you dig into the numbers. Revenue jumped 9% year-over-year from about $15 billion, with the company swinging to a hefty $1.74 billion profit after last year's $330 million loss. That dramatic turnaround partly reflects the absence of a $2.7 billion pension settlement charge that hammered 2024 results, but it also shows IBM's core business momentum building steam.
"Clients globally continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI," CEO Arvind Krishna said in the earnings release. It's corporate speak, sure, but the numbers back up his confidence. The company's AI book of business has swelled to $9.5 billion, up from $7.5 billion just last quarter - that's a 27% jump in three months.
But here's where things get interesting. IBM didn't just meet expectations - it raised them. The company bumped its annual revenue guidance from "at least" 5% growth to "more than" 5%, while boosting its free cash flow target to $14 billion from $13.5 billion. In today's cautious corporate climate, that kind of mid-year guidance raise usually sends stocks soaring.
The business unit breakdown tells a story of strategic transformation paying off. Infrastructure, which includes those legendary mainframe computers, surged 17% to $3.6 billion - proving there's still life in IBM's legacy hardware business. Software revenue climbed 10% to $7.21 billion, right in line with estimates, while consulting revenue of $5.3 billion beat the $5.24 billion projection.
