IBM Earnings: Software Sales Stay Strong Despite Cloudy Macro; Guidance Reflects Cautious Optimism

Narrow-moat IBM reported first-quarter earnings that exceeded both consensus and our revenue estimates, but they fell short of our profitability expectations. The stronger-than-anticipated performance was primarily driven by the company’s software segment, which continues to show resilience amid ongoing macroeconomic turbulence. As IBM increasingly shifts its sales mix toward software, the segment's stability has become a key pillar of the firm's performance. Management laid out second-quarter guidance to soothe tariff and discretionary spending concerns, expecting strong sales in the range of $16.4 billion-$16.75 billion. However, full-year guidance is unchanged at 5% constant-currency revenue growth, suggesting that revenue growth may decelerate after the second quarter.