International Business Machines (IBM) Corp’s stock fell after the company reported flat revenue, even as net income grew 7 percent in the first three months of the year, thanks to strong profit margins in its services business.
IBM’s earnings beat Wall Street’s expectations, but that is often the case with the technology bellwether. Investors appeared more worried that revenue fell shy of estimates.
The stock, which recently hit its highest level ever, fell about 2 percent in extended trading on Tuesday after the first-quarter results came out.
IBM earned US$3.07 billion, or earnings per share of US$2.61, in the January-to-March period. That was up from US$2.86 billion, or US$2.31 per share, a year earlier.
Excluding special items, such as acquisition costs and pension-related expenses, it earned US$2.78 per share in the latest period, well above the US$2.66 per share that analysts were expecting.
Revenues were flat at US$24.7 billion. Software and services revenues increased, but IBM’s hardware and financing segments saw a decline.
The company has been focusing on its software and services offerings lately, which have higher profit margins.
Analysts, on average, were expecting revenue of US$24.82 billion.
The revenue miss, though narrow, raised questions about IBM’s ability to bring in enough new business to keep growing, even as it is able to squeeze out big profits from its software and services units.
IBM, which is based in Armonk, New York, also raised its full-year guidance. It now expects adjusted earnings of at least US$15 per share. That is up from its earlier outlook of at least US$14.85 per share.
Analysts were expecting US$14.93 per share.