IBM stock drops 6.5% after cancellations of US government contracts by controversial cost-cutting agency

From Yahoo Finance: 2025-04-24 10:33:00

IBM stock dropped 6.5% after a controversial cost-cutting agency canceled contracts with the US government, overshadowing positive earnings. The agency led by Trump resulted in widespread federal job cuts and billions in funding cancellations, facing legal challenges. IBM’s CFO confirmed cancellations of contracts worth less than $100 million.

US government contracts make up less than 5% of IBM’s revenue. CEO Krishna stated consulting is vulnerable to pullbacks, impacted by DOGE initiatives and tariffs. IBM’s Q1 earnings beat estimates, with EPS at $1.60 and revenue at $14.5 billion, exceeding projections. Q2 revenue is expected to reach $16.4-$16.75 billion.

IBM’s software business, including AI, underperformed expectations. Analysts view IBM stock as a safe haven in volatile markets. Evercore ISI maintains an Outperform rating, while Jefferies holds a Hold rating due to infrastructure concerns. Wedbush values IBM’s AI business at $6 billion.

Despite challenges, IBM is well-positioned to navigate macro uncertainty and capitalize on AI demand. Analysts believe IBM can drive growth with Generative AI and hybrid applications. Maintaining an Outperform rating, Ives sees IBM as a strong player in the shift towards AI for productivity gains and long-term growth.



Read more at Yahoo Finance: IBM stock falls after results reveal US government contracts canceled by DOGE