IBM Shares Fall Amid Reduced Spending

(Reuters) – IBM shares fell more than 6% on Thursday due to reduced enterprise spending on non-GenAI projects impacting its consulting segment, despite strength in its software unit.

If losses hold, IBM's $214 billion market valuation could dip by over $13 billion.

An uncertain economic outlook has led IBM's customers to cut discretionary spending and focus on GenAI projects, affecting the growth of its consulting services.

> "Infrastructure, which had performed well year-to-date, slowed ahead of the FY/25 refresh cycle while consulting faced headwinds from declining signings due to discretionary spending," said analysts from RBC Capital Markets.

Total revenue grew about 1% to $14.97 billion, falling short of estimates of $15.07 billion, according to data from LSEG.

> "The pause in discretionary spending reflects ongoing IT budget constraints (especially for non-AI) in the short term, but shows potential for growth durability in 2025," stated analysts at Piper Sandler.

However, IBM's software segment emerged as a positive aspect in the third quarter, with a revenue increase of 9.7% to $6.52 billion, as enterprises invest in cloud infrastructure for GenAI technology.

The company anticipates continued revenue trends in the next quarter, particularly from software, though it predicts challenges in consulting due to discretionary spending and infrastructure changes ahead of next year’s refresh.

BofA Securities analysts expect consulting to remain weaker in the first half of 2025 but believe this will be mitigated by an acceleration in software and mainframe cycles.