IBM stock fell in early trading Tuesday as it reported second-quarter results late Monday that beat estimates, but with a forecast on free cash-flow that fell short.
IBM said it now expects $10 billion in free cash flow in 2022, down from its previous guidance of $10 billion to $10.5 billion. The company blamed the strong dollar and the suspension of business in Russia.
IBM reported adjusted earnings of $2.31 a share on revenue of $15.5 billion. Analyst were expecting adjusted earnings of $2.27 on revenue of $15.1 billion.
Revenue jumped 9% from the year-ago quarter and 16% in constant currency, IBM said.
IBM stock dropped 6.8% to 128.70 in morning action on the stock market today.
Adjusting For Kyndryl Spinoff
The second-quarter results included changes IBM was required to make for the spinoff of Kyndryl, IBM's former managed infrastructure services business, which was completed in November. As a result, Kyndryl's historical operational activity has been reclassified to IBM's discontinued operations as required by generally accepted accounting principles, or GAAP.
In the separation, Kyndryl was valued at about $19 billion.
Over the past decade, IBM has invested more than $120 billion in remaking the company. This includes $29 billion in capital expenditures for things like scaling its cloud operations and artificial intelligence offerings and bolstering its security and services capabilities.
The major shifts in business operations help to explain why growth in revenue and earnings has been erratic.
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Software revenue climbed 6% to $6.2 billion, or 12% in constant currency.
"In the quarter we delivered good revenue performance with balanced growth across our geographies, driven by client demand for our hybrid cloud and AI offerings," said IBM Chief Executive Arvind Krishna, in written comments.
"With our first half results, we continue to expect full-year revenue growth at the high end of our mid-single-digit model," he said.
Price Targets On IBM Stock
According to TipRanks, the average price target on IBM stock is 151.89. The high forecast is 166 and a low forecast of 135.
Other companies in the tech sector scheduled to report earnings this week include AT&T, Snap, Tesla, Netflix and Twitter.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
