IBM released first-quarter results Wednesday evening showing stronger sales and profit, but its shares fell Thursday after investors focused on a full-year outlook that did not excite Wall Street. For the quarter ended March 31, the company reported adjusted earnings of $1.91 a share on revenue of $15.917 billion, with gross profit rising to $8.95 billion and gross margin widening to 56.2%.
Chief Executive Arvind Krishna said the company had a strong start to the year, pointing to broad-based revenue growth across IBM’s businesses. He said the results reflected the value of the company’s portfolio and the trust clients place in it, and added that AI remains a tailwind as customers expand its use. IBM said software revenue rose to $7.1 billion, consulting revenue reached $5.3 billion and infrastructure revenue climbed to $3.3 billion, with hybrid cloud and hybrid infrastructure both posting double-digit gains.
The numbers were solid by any normal measure. IBM’s revenue rose 9.5% from a year earlier, GAAP net income increased 15.3% to $1.216 billion, and the company beat Wall Street’s expectations on both revenue and adjusted earnings. But the market fixated on what came next: IBM reiterated full-year constant currency revenue growth of 5%, a pace that fell short of the roughly 5.5% headline growth analysts had been expecting, according to consensus.
That gap helps explain the reaction. Investors have been willing to reward companies that show a clear path to faster growth from AI and cloud spending, and IBM’s fourth-quarter-style reassurance did not reset that bar. Krishna tried to meet that concern head-on, saying IBM products and services are helping clients orchestrate, deploy and govern AI across hybrid environments, and he reiterated the company’s expectation for more than 5% constant currency revenue growth and about $1 billion in year-over-year free cash flow growth in 2026.
The result leaves IBM in a familiar place: better operating performance than the market expected, but not enough guidance momentum to keep the stock moving higher. Thursday’s selloff shows that in this stretch of stock market news, investors are looking past the beat and toward the size of the next leg up.
