IBM Shares Drop 5% Despite Strong Q2 Earnings, Market Reacts to Cautious Outlook

IBM reported robust second-quarter results, with adjusted earnings per share of $2.80 and revenue climbing 8% year-over-year to $17.0 billion, surpassing analyst expectations. Free cash FLOW for the first half of 2025 reached $4.8 billion, underscoring the company's financial health.

Despite these strong metrics, shares fell over 5% in after-hours trading, closing at $282.01. Market sentiment appeared rattled by IBM's conservative full-year revenue guidance of at least 5% growth at constant currency, alongside concerns about tightening margins in its software segment.

The software division, which grew 10% to $7.4 billion, was powered by hybrid cloud and automation solutions. Red Hat-led hybrid cloud sales surged 16%, yet investors focused on macroeconomic uncertainties and the potential for slower growth in certain business areas when adjusted for currency fluctuations.