After shocking quarter, IBM insists that AI isn’t killing the mainframe — SkimNews
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- IBM reported $17.2B in quarterly revenue, $9.9B in gross profit, ~58% margins, and $2.2B in net earnings — yet results fell well short of Wall Street expectations, prompting an unusual pre-warning from CEO Arvind Krishna.
- IBM's stock dropped 25% in a single day after Krishna's advance "letter to investors," the company's biggest single-day decline ever under his six-year tenure.
- IBM's mainframe business fell 42% in the quarter, and the company lowered its full-year growth forecasts in response.
- CFO Jim Kavanaugh explained that IBM earns $3 in software revenue for every $1 of mainframe hardware sold, making the mainframe decline a cascading problem across the business.
- Krishna attributed the miss to "tens" of customers who diverted budgets to other hardware to absorb 15-30% data center and PC price hikes driven by AI-related component costs, the same trend Dell, HP, and Apple have flagged.
- Krishna insisted "we see no evidence of clients moving off the mainframe," noting that some deferred customers have already resumed purchases this quarter.
Why it matters: IBM's 42% mainframe revenue collapse triggered a record 25% single-day stock plunge and forced lower full-year guidance. The AI-driven 15-30% hardware cost surge is now diverting client budgets away from mainframes, a problem because IBM earns $3 in software for every $1 in mainframe hardware.
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