The IBM stock price suffered a harsh reversal on Thursday after the company published mixed financial results. It was trading at $268 in the premarket, down from Wednesday’s closing price of $287. This price is about 11% below the year-to-date high, meaning that it has now moved into a technical correction.
IBM software revenue disappoints
IBM, commonly known as the Big Blue, published mixed financial results on Wednesday that demonstrated that its business was doing relatively well.
Its revenue came in at $16.3 billion, up by 9% from what it made in the same period last year. This growth was driven by the infrastructure segment whose revenue rose by 17%. It was followed by the software and consulting segments, whose revenue grew by 10% and 3%, respectively.
IBM’s software revenue, which includes its AI initiatives, was mostly driven by a 24% increase in automation and 14% jump in its hybrid cloud business. The only laggard in this segment was its transaction processing, whose revenue fell by 1%.
READ MORE: IBM stock price is rising: Is the Big Blue a good buy today?
IBM’s consulting business made $5.3 billion in revenue, while its infrastructure rose by 17% to $3.6 billion.
To a large extent, there are signs that the company is lagging behind its peers in the AI industry since it is also involved in the cloud computing industry. It has only made $9.5 billion in GenAI revenue since its inception.
Ideally, one would expect a company like IBM that is already a major player in the cloud computing industry to become a big player in the AI data center segment that is making other firms like Microsoft, CoreWeave, and Nebius billions of dollars. Yet, IBM has not been selected by any major company to offer these services.
The company has also not created any mainstream AI models as its competitors like Microsoft and xAI have done recently. This is notable since the company spent billions of dollars building Watson, a large data and AI platform that failed to produce the expected results.
The company’s Watsonx platform focuses primarily on enterprise customers, giving them a platform to train, tune, and deploy models. It recently partnered with Anthropic to infuse Claude into IBM products.
READ MORE: Forget pure plays, IBM stock may be the new quantum computing king
IBM has largely lost the AI race the same way it dif with the cloud, where it has a 2% market share, much lower than other companies like Amazon, Microsoft, Google, Alibaba, Oracle, and Salesforce.
On the positive side, the company has expanded its pre-tax margins in the last nine consecutive quarters. Also, the company has a solid balance sheet with over $14.9 billion in cash and $63 billion in debt. It has returned about $4.7 billion to shareholders through dividends this year.
IBM stock price technical analysis
IBM stock price chart | Source: TradingView
The daily timeframe chart shows that the IBM stock price has been in a strong uptrend in the past few weeks, moving from a low of $233 in August to the current $287.
It has moved between the ascending channel that started forming in 2024. The stock has also remained above the 50-day and 100-day Exponential Moving Averages.
It plunged after slightly below the 50-day Exponential Moving Average (EMA) after it published its financial results.
Therefore, the most likely scenario is where the IBM stock remains under pressure for a while and then resumes the uptrend.
The post IBM stock price analysis: is the Big Blue losing the AI race? appeared first on Invezz
