July 14 (Reuters) – IBM said it had “faltered” in keeping pace with a shift in corporate spending toward data-center infrastructure from software and forecast \u200csecond-quarter revenue below estimates, the clearest sign yet of AI’s growing toll \u200con the sector. <\/p>\n
The warning triggered a 22% slump in IBM’s shares and a selloff in the broader \u200bsoftware sector. It also dragged Dow futures lower, while the iShares Expanded Tech-Software Sector ETF fell more than 4%. <\/p>\n
Software investors have long been on edge over fears that AI tools capable of automating routine work could pose an existential threat to the \u200cindustry. Tuesday’s announcement showed that \u2060even the boom in spending on servers, chips and networking gear for AI was eating into software budgets. <\/p>\n
“In the last few \u2060weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases,” IBM CEO \u200bArvind Krishna \u200bsaid in a letter to investors. <\/p>\n
“While we \u200banticipated some supply-chain related impact in \u200cour expectations, we did not anticipate the magnitude of the capex reprioritization,” Krishna said, adding that the company had “faltered” in adapting quickly enough and that “numerous large deals” had failed to close as expected. <\/p>\n
According to the preliminary results, the company expects revenue of $17.2 billion during the quarter, compared with analysts’ estimate of $17.86 billion, according to \u200cdata compiled by LSEG. <\/p>\n
Adjusted earnings per share is \u200bexpected to be $2.93, compared with the estimate of $3.02. <\/p>\n
“This \u200bis an ugly moment for \u200bIBM and software stocks… the big question will be how long \u200cthe shift to infrastructure and cybersecurity \u200blasts,” said Chris Beauchamp, \u200bchief market analyst at IG Group. <\/p>\n
“A few more months might be bearable, but more than that and serious questions will be asked all over again \u200babout software stocks.” <\/p>\n
Microsoft, ServiceNow, \u200cSalesforce and Intuit fell between 3% and 5%. <\/p>\n
IBM is expected to report \u200bsecond-quarter results on July 22. <\/p>\n
(Reporting by Harshita Mary Varghese in Bengaluru; \u200bEditing by Shilpi Majumdar and Saumyadeb Chakrabarty) <\/p>\n","protected":false},"excerpt":{"rendered":"July 14 (Reuters) – IBM said it had “faltered” in keeping pace with a shift in corporate spending…\n","protected":false},"author":2,"featured_media":1088712,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[3163],"tags":[323,1942,54778,297465,297464,219537,53,16,15],"class_list":["post-1088711","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-arvind-krishna","tag-ibm-ceo","tag-software-sector","tag-software-stocks","tag-technology","tag-uk","tag-united-kingdom"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/116918547092144587","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/1088711","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=1088711"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/1088711\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/1088712"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=1088711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=1088711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=1088711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}