International Business Machines Corp (NYSE:IBM) CEO Arvind Krishna said a few large capital expenditure deals were delayed late in the second quarter as customers paused spending to reassess cybersecurity investments following the launch of Anthropic‘s Mythos, while maintaining that the company’s software business remains unaffected by artificial intelligence.
Large Deals Delayed
CNBC reporter Sara Eisen said in a post on X Tuesday that Krishna told her the delayed transactions were tied to IBM’s mainframe business and the software associated with it, rather than reflecting broader weakness across the company.
“A few large capex deals paused near the end of the quarter. It’s not widespread. It’s mainframe and the software associated with it,” Krishna said.
He said customers put new spending decisions on hold while reassessing cybersecurity budgets following the launch of the cybersecurity-focused AI model, Mythos.
“Mythos is making people pause to say, wait how much do I need to spend on cyber? They’re pausing on new deals until they know,” Krishna added.
Customers Shifted Spending
On Tuesday, IBM issued selected preliminary second-quarter results that missed Wall Street expectations after weaker-than-expected sales of its Z mainframe systems and related transaction-processing software.
IBM shares plunged more than 25% following the announcement, marking a steeper single-day decline than the stock suffered during the 1987 ‘Black Monday’ market crash.
In a letter accompanying the earnings numbers, Krishna said enterprise customers redirected capital spending in the final weeks of June toward servers, storage and memory infrastructure to secure supply ahead of expected price increases.
Q2 Earnings Expectations
IBM expects second-quarter revenue of $17.2 billion, up 1% year over year but below the Wall Street consensus of $17.86 billion.
The company forecasts diluted GAAP earnings per share of $2.27, down 2% from a year earlier, while operating (non-GAAP) EPS is projected at $2.93, up 5% year over year but below the Wall Street consensus estimate of $3.02.
IBM is scheduled to report its full second-quarter results and hold its quarterly earnings conference call on July 22.
Price Action: IBM shares plunged 25.21% to close at $217.07 on Tuesday before recovering 1.12% in extended trading.
Benzinga edge rankings indicate IBM has a Momentum score in the 47th percentile and a Growth score in the 59th percentile.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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