After shocking quarter, IBM insists that AI isn't killing the mainframe
After IBM's stock crashed last week on warnings of poor mainframe sales, the CEO explained that AI wrecked corporate hardware budget, temporarily. On Wednesday, IBM officially reported earnings and the news was as bad as everyone knew it would be. While the 115-year-old company still generates boatloads of cash - $17.
Key Takeaways
- 9 billion in gross profit, nearly 58% margins, and $2.
2 billion in net earnings for the quarter - its results fell well short of Wall Street's expectations.
- The company's stock instantly tanked 25%, its biggest single-day decline ever .
Until then, the stock had performed well under Krishna's six years of leadership, buoyed by the AI data center boom that had been lifting all boats.
- What happened, they said, was that "tens" of customers that were due to buy a new mainframe during the quarter opted not to do so.
That may not sound like a lot of customers, but mainframes are systems that cost hundreds of thousands to millions of dollars, and with maintenance contracts and software, generate many millions more.
- "When they were faced with that issue, then they decided to move budget to those areas where they were having that extreme price," Krishna said.
Enterprise hardware makers like Dell and HP have warned that rising costs on components like memory, caused by the AI build-out boom, have forced them to raise prices .
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Stats & Key Facts
- #9 billion in gross profit, nearly 58% margins, and $2.
- #2 billion in net earnings for the quarter - its results fell well short of Wall Street's expectations.
- #The company's stock instantly tanked 25%, its biggest single-day decline ever .
- #IBM's cash-cow mainframe business was down 42%.
9 billion in gross profit, nearly 58% margins, and $2. 2 billion in net earnings for the quarter - its results fell well short of Wall Street's expectations. It was such a bad miss that IBM CEO Arvind Krishna and the board took the unprecedented step of warning investors ahead of time that earnings "was worse than our expectations," offering everyone a sneak peek.
He published a "letter to investors," last week sharing preliminary results. It warned of abysmal revenue in the company's all-important "infrastructure" category and said that profit margins were also going to take a hit. The company's stock instantly tanked 25%, its biggest single-day decline ever .
Until then, the stock had performed well under Krishna's six years of leadership, buoyed by the AI data center boom that had been lifting all boats. On Wednesday, IBM also lowered its full-year growth forecasts, meaning this horrible quarter would impact the rest of the year. IBM's cash-cow mainframe business was down 42%.
For more details please read the original article at TechCrunch AI.
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