Shares of tech company International Business Machines (IBM) slipped in after-hours trading after it reported earnings for its second quarter of Fiscal Year 2025. Earnings per share came in at $2.80, which beat analysts’ consensus estimate of $2.65 per share. In addition, sales increased by 7.6% year-over-year, with revenue hitting $17 billion. This beat estimates of $16.59 billion.
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When breaking down the numbers further, Software, Infrastructure, and Consulting revenues increased by 10%, 14%, and 3%, respectively. However, the company’s overall growth was primarily driven by the Software segment, as it is the firm’s largest segment, as shown in the image below from Main Street Data.
IBM also generated $1.7 billion in net cash from operating activities, which was a $400 million decrease compared to the same period last year. Free cash flow rose by $200 million year-over-year to reach $2.8 billion. Moreover, IBM returned $1.6 billion to shareholders through dividends.
IBM’s Guidance for 2025
Looking forward, management has provided the following guidance for FY 2025:
- Revenue growth rate of at least 5% on a constant currency basis versus analysts’ estimates of 5.6%
- Free cash flow of more than $13.5 billion for the full year
As we can see, the company’s outlook is worse than expected, which is likely why the stock fell in after-hours trading.
Is IBM a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on IBM stock based on nine Buys, five Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average IBM price target of $287.53 per share implies 2% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
